Aetna Acquires an HMO

HARTFORD, Connecticut: Aetna Life & Casualty Co. today announced that it is acquiring U.S. Healthcare in an $8.9 million transaction that will create the nation's largest health insurance provider. Company officers said that the merged company would cover some 23 million and earn $300 million in profits within 18 months by creating revenue and reducing expenses. Some jobs would be cut, but Aetna refused to say how many. "It would be irresponsible to throw out a lost jobs estimate before we do all our homework," said Aetna spokesman Fred Laberge. The merger is the latest in a series of moves by Aetna to secure a prominent place for itself in the lucrative field of managed health care. Last November, Aetna announced that it was selling its property-casualty operations for $4 billion to Travelers Group in order to focus more on health care. Aetna's purchase of U.S. Healthcare is part of a larger shift in the industry toward vertical integration, says TIME's Bill Saporito, and the deal probably will be scrutinized closely by federal regulators. By merging with a leader in managed health care, Aetna will gain leverage over other players in the industry, such as physicians and pharmaceutical companies, says Saporito. Aetna will pay $34.20 in cash and .2246 of a share of its stock for each Healthcare share. Under the deal, U.S. Healthcare shares are valued at $57, up from Friday's price of $45.88 a share.