Aetna, Humana Face Federal Antitrust Lawyers In Court

Lawyers for insurance giants Aetna and Humana will begin battling government antitrust lawyers Monday in a Washington, D.C., court, seeking to get legal clearance to complete their planned $37 billion merger.

Worried that the deal would raise prices and lower benefits for customers, the Department of Justice, eight states and the District of Columbia sued to block the deal. The outcome of the trial, to be presided by U.S. District Judge John Bates, could have significant ramifications on how seniors buy Medicare and the insurance options available to individuals who are not reliant on employer coverage. If the deal falls through, Humana could get a $1 billion in breakup fee from Aetna.

The legal fight is unfolding at a time when federal regulators are showing greater concern for the consolidation in the health insurance market. The DoJ also is in the midst of a trial to block Anthem’s deal to buy Cigna for $54 billion. Those two insurers cover about 17% of the U.S. population and regulators argue that consolidation of the market for private health insurance for employers and individuals would lessen competition, harming consumers, doctors and hospitals.

Eyeing the lucrative market for aging Baby Boomers, Aetna, based in Hartford, Conn., struck a deal in early July to buy Louisville-based Humana, the largest provider of the private-market option for Medicare, called Medicare Advantage. Aetna is the fourth-largest Medicare Advantage seller.

The post-merger company would create the largest seller of Medicare Advantage plans, covering more than 4.1 million seniors. The combined company would be the Medicare Advantage monopoly in 70 counties, the DoJ says. “The proposed merger likely would cause seniors to pay significantly higher premiums and receive significantly reduced benefits,” the DoJ wrote in its pre-trial brief on Nov. 23.

Aetna argues that the merger wouldn’t hurt competition because seniors who don’t want Medicare Advantage plans can continue to opt for traditional Medicare, which is administered by the Centers for Medicare and Medicaid Services. The DoJ erred in excluding traditional Medicare in its competition analysis, Aetna says. “Original Medicare and Medicare Advantage are functional substitutes, and CMS treats — and regulates — both kinds of Medicare that way,” the company says.

To assuage regulators, Aetna-Humana agreed to sell their Medicare Advantage business in some markets to Long Beach-based Molina Healthcare. “Any divestitures to Molina would ensure that the merger will give rise to no anti-competitive effects,” the companies say.

But regulators doubt Molina has the wherewithal to be a viable competitor. Molina entered 63 counties to market Medicare Advantage plans since 2008, but it now has only 424 individuals enrolled in six counties in the U.S. Molina is “a Medicaid specialist with junk-bond-rated debt,” the DoJ says. “Molina’s previous attempts to market individual (Medicare Advantage) plans have been utter failures.”

Also at issue is Aetna-Humana’s commitment to the Affordable Care Act — better known as Obamacare — which created the private-market health insurance exchanges in 2010 for individuals. The merger, the DoJ says, would lead to a loss of competition on the public exchanges in 17 counties in Florida, Georgia and Missouri. “The public exchanges also rely on vigorous competition among insurers,” it said.

Aetna CEO Mark Bertolini, anticipating the antitrust scrutiny, told the DoJ on July 5 in a letter that blocking the deal “would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support” of Obamacare.

After the DoJ filed its lawsuit, Aetna followed through and announced in August its intention to withdraw its participation in 11 of its 15 state Obamacare exchanges in 2017.

The DoJ says the company’s move shouldn’t be factored in the court’s interpretation of the merger’s competitive effects on Obamacare markets. “The court should not allow Aetna to avoid antitrust scrutiny by essentially shuttering its factory,” it says.

Aetna’s Bertolini says its withdrawal from the public-exchange business is related more to financial considerations. The company has been operating it “at a substantial loss,” he says.

“It is also beyond dispute that the ACA exchanges are threatening to collapse under their own weight,” Aetna says.

Source Link