The unexpectedly close attention consumers are paying to prices on marketplaces created by the Affordable Care Act is contributing to millions of losses at Humana and merger partner Aetna, leading both insurance giants to retreat as fewer healthy people than forecast have signed up, according to a new story by The New York Times.
The result: Louisville-based Humana said it plans to largely exit the marketplaces, reducing coverage to no more than 156 counties in 2017 vs. 1,351 today.
Bertolini
Aetna of Hartford expects a loss of more than $300 million in Affordable Care Act business this year; it previously said it was a break-even operation. And it told investors in its second-quarter financial report that it’s halted plans to enter more states. “We are evaluating our footprint as it exists today to understand what solutions we can put forward to either fix the business or exit the business,” CEO Mark Bertolini told Wall Street analysts.
PAPA JOHN’S said today it will open 40 restaurants in Russia over the next eight years, with the first store scheduled to open in St. Petersburg next month. Franchiser PJ Western Retail already operates more than 80 restaurants in Russia and Belarus; it’s owned by Global Restaurant Management and private equity firm Capman Russia Fund (press release). The chain opened 357 outlets last year, and now has nearly 5,000 restaurants consisting of 752 company-owned and 4,141 franchised in all 50 states and in 39 countries and territories. Beyond the U.S., the country with the single-most locations is China, with 244, as of the end of last year (annual SEC report).
In Hawaii, a Papa John’s worker is among the latest of scores of people affected by a recent hepatitis A outbreak, according to the state Department of Health. The unidentified employee worked at a restaurant in Waipahu on the island of Oahu, and brings to a total of 168 cases confirmed through yesterday. DOH investigators suspect the source of the outbreak was likely a product widely distributed primarily on Oahu (KHON-TV).
Bates
HUMANA: The federal judge hearing the Justice Department’s case to block Aetna’s $37 billion purchase of Humana has set a trial date for Dec. 5 — later than the companies had requested — and allowed 13 days for the proceedings. The date is a compromise between the two sides. During a hearing yesterday in Washington, U.S. District Judge John Bates said he was leaning toward an early November trial, but he later accepted the Justice Department’s arguments that date wouldn’t give the agency enough time to prepare. The insurers had argued for an earlier time frame, noting that the current contractual agreement between the two is subject to a Dec. 31 deadline. If the merger isn’t approved by then, Humana would have the option of walking away and potentially collecting a $1 billion breakup fee. Bates told the parties to proceed with the “expectation” that he will issue a ruling in mid-January (Wall Street Journal and Bloomberg).
Antitrust cases are typically kept on a strict timetable set by the judge, who in this case is very efficient, said David Balto, a lawyer representing several consumer groups that oppose the insurance mega-mergers. Even though Aetna and Humana extended the deadline to close the deal by the end of this year, the litigation is likely to force them to extend the closing again (Courier-Journal). The DOJ last month sued to block the merger, arguing that it would likely raise consumer prices and stifle competition.
Bates was appointed to the bench in December 2001 by President George W. Bush (Wikipedia).
FORD says professional Generation-Xers don’t always drive SUVs, but when they do they drive a Ford Explorer Sport, according to a new vehicle customer study by MaritzCX. the The vehicle has the highest percentage of Gen-X buyers of any non-luxury SUV in the United States, MaritzCX says (press release). X-ers are the spawn of the huge baby boom generation. There are no precise dates for when the group starts or ends; demographers have used birth years bracketed by the early 1960s to early 1980s (Wikipedia). Ford employs nearly 10,000 workers at truck and auto factories in Louisville; more about the automaker’s local operations.
KFC is opening a new restaurant today at Louisville International Airport, as part of an ongoing renovation of the terminal there (Courier-Journal).
TEXAS ROADHOUSE has reportedly backed out of plans to build a restaurant in the northern Chicago suburb of Mount Pleasant (Journal Online).
AMAZON‘s stock touched a new record trading high, $773.75, before easing back to a recent $771.51, up $2.95. It’s one of the Louisville area’s biggest employers, with 6,000 workers at distribution centers in Jeffersonville and Shepherdsville. More about Amazon here.
GE: The new GE Keurig Beverage Center prototype would be built right into the wall and replace basically every appliance that makes drinks, including coffee, soda, and smoothies. Wolf Appliances debuted a semi-similar mega-coffeemaker two years ago. The cost? Well over $3,000, and it didn’t even have the built-in blender.
There’s no plan to make more Beverage Centers just yet (and no word on how much each one would cost), but Chris Bissig, GE Appliances’ manager of concept and brand development wouldn’t rule it out (CNET and Tech Insider).
CNET’s cruel conclusion: The gadget looks like something out of “Spaceballs,” the 1987 Star Wars parody starring director Mel Brooks, John Candy and Rick Moraines, featuring a character named Pizza the Hut.
Here’s a bad photo of what it looks like:
That’s a pullout tray of Keurig cups is in the foreground.
Amazon’s stock (blue) rose and Walmart’s stock (red) fell today on the Jet deal.
AMAZON: Walmart’s $3 billion bet on discounter Jet may reinvigorate growth in its online shopping business, which has slowed in recent quarters even as Amazon’s overall sales have rocketed above $100 billion annually (CNN). Wall Street’s not holding its breath; Amazon’s stock rose a smidge and Walmart’s fell a bit by the time trading closed at 4 p.m. ET (Google Finance).
Earlier today, news emerged that Amazon’s office has been searched by Japan’s Fair Trade Commission over its dealings with merchants who sell goods through the retailer, a person with knowledge of the matter told Bloomberg. The antitrust agency is looking into whether Amazon sought deals with sellers that gave it more favorable conditions over other e-commerce companies in one of its biggest foreign markets. It wasn’t immediately clear when the JFTC inquiry took place (Bloomberg).
The retailer’s shipping costs are skyrocketing, underscoring why it just unveiled its first branded Prime Air cargo plane. Amazon’s shipping expenses soared 43% vs. a year ago during the first half of the year. In 2013-2015, those costs were rising 29% to 32% annually. This year, it’s already on track to spend nearly $6 billion on shipping.
“Bottom line,” says ZD Net, “Amazon has no choice but to become more efficient than UPS and FedEx. If Amazon can use its own air fleet to even come close to its shipping vendors, it’ll potentially save billions of dollars simply by cutting out the middleman.”
Here’s a time-lapse video showing the new Prime Air Boeing 767 being readied for its debut this weekend at the annual Seafair air show in its corporate hometown of Seattle; more news coverage about Prime Air.
Amazon and UPS are both big employers in the Louisville area; UPS has 22,000 workers at its Louisville International Airport hub, and Amazon employs 6,000 at distribution centers in Jeffersonville and Shephardsville.
KINDRED has just filed its detailed quarterly 10-Q report with the Securities and Exchange Commission. The hospital and nursing giant reported strong earnings on Thursday (SEC document).
HUMANA could lose its Justice Department battle to win approval for the insurer’s proposed $37 billion merger with Aetna, but Louisville’s economy could wind up a winner — if the history of GE Appliances’ auction is a guide (WDRB).
In other news, the Baxter Avenue Theatres is adding powered reclining chairs and a full bar to the seven-screen Highlands complex at Mid-City Mall, an approximately $500,000 upgrade that will start in October (Insider Louisville).
The Louisville-based health insurer added new language to the “Risk Factors” section of its quarterly 10-Q report filled today with the Securities and Exchange Commission, about the Department of Justice’s lawsuit last month blocking Humana’s $37 billion merger with Aetna of Hartford. Here’s what the new section says.
On July 21, the DOJ filed a civil antitrust complaint (which we refer to as the DOJ action) against us and Aetna in the U.S. District Court for the District of Columbia, charging that the merger would violate Section 7 of the Clayton Antitrust Act and seeking a permanent injunction that would prevent the Merger. The filing of the DOJ action is delaying, and, if we and Aetna are unsuccessful in defending against or settling the DOJ action, could ultimately prevent, the consummation of the merger. There can be no assurance that we will be successful in defending against or settling the DOJ action or that the merger will be consummated by any particular time, if at all.
In addition, even if we and Aetna enter into a settlement with respect to the DOJ action, there can be no assurance that we and/or Aetna will not be required to agree to terms, conditions, requirements, limitations, costs or restrictions that could further delay completion of the merger, impose additional material costs on or limit the revenues of the combined company, or limit some of the synergies and other benefits we presently anticipate to realize following the merger. We cannot provide any assurance that any such terms, conditions, requirements, limitations, costs or restrictions will not result in a material delay in, or the abandonment of, the merger.
PAPA JOHN’S: A federal judge sided with restaurant chain Panera Bread and issued a temporary restraining order barring a former IT executive from working at Papa John’s. U.S. District Judge John A. Ross said Panera would likely win its lawsuit, filed last month, accusing former vice president Michael Nettles of violating his noncompete agreement and misappropriating trade secrets by taking a job as the chief information officer at the Louisville pizza chain (Law 360).
Also today, Papa John’s shares closed at $77.38, up 4.6%, or $3.37, after the chain reported second-quarter results beating Wall Street forecasts after markets closed yesterday afternoon. Earlier today, the stock hit a new record intraday high of $78.09 before easing back. The company has also filed its quarterly 10-Q report with the Securities and Exchange Commission.
HUMANA: Racing to save its $37 billion merger with Humana, Hartford-based Aetna has urged a judge to hear its case in the fall — and before considering a second merger of two other insurance companies that Justice Department antitrust enforcers are trying to stop (Reuters).
Earlier today, Humana reported second-quarter results that beat forecasts on both the top and bottom lines. Revenue was $14 billion vs. $13.7 billion a year ago, and adjusted earnings per share were $2.30 vs. $1.77. Analysts were expecting $13.6 billion in revenue and $2.21 EPS. The Louisville-based health insurer also reaffirmed its full-year 2016 financial guidance increase on July 21 to earn $9.25 a share vs. the previous $8.85 EPS. Humana’s stock closed at $173.48, up $3.91, or 2.3%.
Broussard
“Our second quarter and year-to-date results show the improvement in the effectiveness of our clinical programs and increasing clinical engagement by our members,” CEO Bruce Broussard said in the earnings release. “The improved health outcomes from these programs is not only lowering healthcare costs, but allowing more affordable options for our Medicare members.”
The insurer said it wouldn’t hold a customary conference call with analysts to discuss the report because of the pending merger with Aetna, and doesn’t expect to hold any in the quarters ahead, either (press release and MarketWatch).
Finally today, Humana filed its second-quarter report with the Securities and Exchange Commission — the full 10-Q (SEC document). Humana has 12,500 employees in Louisville and about 50,000 nationwide; more about the company.
TACO BELL follows a three-step process to decide whether to enter a foreign market for the first time, according to Pizza Marketplace:
Move a team to the city under consideration to learn what everyday life is like in the target city, including how people get to work and what they do for fun.
Get to know the locals through focus groups to see how outsiders can become part of the community.
Cook and prepare food to understand what flavors work — and don’t work. In Tokyo, for example, prospective customers wouldn’t order nachos and cheese because they didn’t they want to get messy. Solution? Nachos became seasoned chips with dipping sauces.
In other news, franchiser Wag n’ Wash of Denver expects its first Kentucky pet food and grooming store to open soon in Louisville with an in-house bakery menu that includes pumpkin ravioli, sushi, pies and cakes using human-grade ingredients (Courier-Journal). This will be Wag n’ Wash’s 15th store since opening in 1999.
The former publisher of The Voice-Tribune — Tracy Beale, formerly Tracy Blue — is launching online magazine TAB’s View next month with a staff of six, including herself. She left the Voice-Tribune last winter amid her high-profile divorce from the weekly’s then-owner, Blue Equity CEO Jonathan Blue. Blue Equity recently sold the Voice-Tribune and other publications to the owner of LEO (Insider Louisville).
HUMANA: UnitedHealthcare has filed a formal protest against a Defense Department decision to award the next round of Tricare contracts to Humana and another competitor. The Pentagon selected Humana Government Business to manage the brand new East region, a consolidation of the North and South regions, in a contract worth as much as $40.5 billion. Health Net Federal Services got the West region contract. Humana manages the current South region and Health Net the North (Military Times).
Also, Humana and Aetna announced this morning a deal to sell some of their Medicare Advantage assets to Molina Healthcare for $117 million in cash, in the health insurers’ latest effort to win Justice Department approval for their proposed $37 billion merger. The transactions are subject to the successful completion of the merger, plus approvals from regulators. Under the deal, Molina would get about 290,000 Medicare Advantage members in 21 states, the two companies said, “preserving robust competition for seniors choosing to receive Medicare coverage through Medicare Advantage plans and addressing a key concern of the U.S. Department of Justice in its challenge to the Aetna-Humana transaction” (press release). Today’s announcement followed a July 21 DOJ lawsuit against the two companies to block their tie-up over fears it would be anticompetitive and raise consumer prices.
Aetna, meanwhile, reported better-than-expected second-quarter results this morning, in a report where it also became the last of the five major national health insurers to project a loss on Affordable Care Act plans for 2016. The Hartford-based insurer said it would re-evaluate its participation in the business and cancel a planned expansion. It also said it was setting up a $65 million reserve to account for expected losses on individual plans over the rest of this year (Wall Street Journal).
Taylor
TEXAS ROADHOUSEshares fell sharply, closing at $41.80, down 12.4%, or $5.90, after the Louisville-based steakhouse chain reported disappointing second-quarter results yesterday after stock markets had already closed (Google Finance). Founder and CEO Kent Taylor discussed the results with Wall Street analysts in a transcript (Seeking Alpha). The chain has nearly 500 company-owned and franchised restaurants in 49 states plus five foreign countries with 48,000 employees. About 500 of those workers are in Louisville; more about Texas Roadhouse.
FORD said total truck sales, including pickups and vans, grew 5% in July versus a year ago with 87,104 sold. Overall company U.S. sales were down 3%, with 216,479 total vehicles sold (press release). Shares closed at $11.94, down 4.3%, or 53 cents (Google Finance). Ford’s Kentucky Truck Factory employs about 5,100 workers, producing F-250 and F-550 Super Duty pickups, plus Expeditions, and Lincoln Navigators.
Great afternoon in Ohio & a great evening in Pennsylvania – departing now. See you tomorrow Virginia! pic.twitter.com/jQTQYBFpdb
KFC: The World Wide Web is chowing down on a photo of GOP White House nominee Donald Trump eating a KFC meal last night aboard his gold-plated private jet, using real cutlery (as opposed to the plastic utensils most everyone else uses or, let’s be clear, hands). Trump tweeted a photo of the moment near 10:30 p.m.; see Tweet, above. “It’s tiny finger lickin’ good,” wrote the New York Daily News, which then went on to quote one Twitter user saying: “Eating KFC with a fork and knife is like eating a candy bar with chopsticks.”
Britain’s Telegraph was even more over-the-top pretend aghast: “What kind of madman — what kind of abominable lizard in an orange human skin suit, a Sunny Delight scare story incarnate — would eat a biscuit with a knife and fork? The same madman who was last night pictured eating a bucket of KFC with a knife and fork, that’s who.” And then there was the whole KFC vs. Popeyes vs. Bojangles’ contretemps (Daily News, Telegraph and Daily Caller). Here’s yet more news coverage — plus, all the Twitter reaction.
TACO BELL: In California, several employees in northwest Bakersfield no longer work at a Taco Bell there after reports they had taunted a local police officer last week, according to the manager of the outlet. A customer had told a local TV station he could hear the employees making “oink oink” sounds and laughing while the officer was ordering. The manager said the employees no longer work there; he could not say how many employees were involved (Kern Golden Empire).
News about business and culture in Louisville, Ky.
There’s no plan to make more Beverage Centers just yet (and no word on how much each one would cost), but Chris Bissig, GE Appliances’ manager of concept and brand development wouldn’t rule it out (
Earlier today, news emerged that Amazon’s office has been searched by Japan’s Fair Trade Commission over its dealings with merchants who sell goods through the retailer, a person with knowledge of the matter told Bloomberg. The antitrust agency is looking into whether Amazon sought deals with sellers that gave it more favorable conditions over other e-commerce companies in one of its biggest foreign markets. It wasn’t immediately clear when the JFTC inquiry took place (
“Bottom line,” 
On July 21, the DOJ filed a civil antitrust complaint (which we refer to as the DOJ action) against us and Aetna in the U.S. District Court for the District of Columbia, charging that the merger would violate Section 7 of the Clayton Antitrust Act and seeking a permanent injunction that would prevent the Merger. The filing of the DOJ action is delaying, and, if we and Aetna are unsuccessful in defending against or settling the DOJ action, could ultimately prevent, the consummation of the merger. There can be no assurance that we will be successful in defending against or settling the DOJ action or that the merger will be consummated by any particular time, if at all.
In other news, franchiser 
Boulevard 