Federal judge blocks Aetna, Humana merger, citing competition concerns

1/24/2017

WASHINGTON — The proposed $37 billion merger between Aetna and Humana hit a roadblock Monday, when U.S. District Court Judge John Bates issued his ruling in a lawsuit between the companies and the federal government. The Dept. of Justice sued on behalf of 264 counties in 21 states where it said a merger would limit competition unlawfully in the Medicare Advantage markets and 17 counties in three states where it said public exchange competition would be limited.


 


“In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges,” Bates wrote. “After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the Court mostly agrees.”


 


The companies argued that the government should consider the product market of both Medicare Advantage and Medicare benefits from the government. They also argued that the government’s regulatory oversight when it comes to Medicare, potential entry of new competitors and a proposed sale of some of their Medicare Advantage business to Molina healthcare would lessen the likelihood of competitive impact. 


 


“The Court concludes that the proposed merger is likely to substantially lessen competition in Medicare Advantage in all 364 complaint counties and in the public exchanges in the three complaint counties in Florida,” Bates’s decision said. “In [the Medicare Advantage] market, which is the primary focus of this case, the merger is presumptively unlawful—a conclusion that is strongly supported by direct evidence of head-to-head competition as well.”


 


When it comes to the public exchange argument, the companies said there wasn’t any competition between Aetna and Humana in the identified counties because Aetna decided not to compete there in 2017. The government argued that the decision not to compete was done with the aim of avoiding legal review of the merger. The companies offered as an alternative argument that, even taking into account past competition and uses it to forecast potential future competition Humana’s market share would be reduced this year and in the future to the point that a merger wouldn’t cause market concentration to rise to unlawful levels.


 


“The Court finds that Aetna is likely to offer plans on the exchanges only in the three complaint counties in Florida in 2018 and beyond, and that the merger is likely to substantially lessen competition in those counties,” the decision said. “And as in the Medicare Advantage market, the Court concludes that defendants’ proffered efficiencies do not offset the anticompetitive effects of the merger.”


 


The companies are reportedly mulling an appeal, with Aetna spokesman T.J. Crawford telling USA Today, “"we're reviewing the opinion now and giving serious consideration to an appeal, after putting forward a compelling case.”


 

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