“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,” Judge John Bates of the District of Columbia wrote in his 158-page ruling. “After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the court mostly agrees.”
Tom Murphy of the Associated Press writes that Bates concluded “that federal regulation would probably be “insufficient to prevent the merged firm from raising prices or reducing benefits,” and neither new competitors nor an Aetna plan to sell some of the combined company’s business to another insurer, Molina Healthcare Inc., would be enough to ease competitive concerns.”
Bates also concluded that Aetna had tried to “leverage” its continued participation in the Patient Protection and Affordable Care Act exchanges in exchange “for favorable treatment from DOJ regarding the proposed merger,” Kevin McCoy reports for USA Today. Aetna’s announcement that “it would drastically scale back” on exchange offerings not only hurt its case but “jeopardized the ACA exchanges,” Shelby Livingston reports for Modern Healthcare.
Craig Garthwaite, a health economist at Northwestern University, told Livingston that Aetna’s move reduced competition and choice for consumers and gave an “impression to people that the marketplaces are failing” and “that’s totally inaccurate.”
Aetna’s shares fell about 3 percent to $119.20 and Humana’s stock finished more than 2 percent higher at $205.02 on Jan. 23, the day of the ruling.
“We’re reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case,” Aetna spokesman T.J. Crawford said in a statement.
However, several analysts told the investing website Seeking Alpha that any appeal is unlikely to succeed.
The Department of Justice praised the ruling as a win for consumers.
“Today’s decision is a victory for American consumers — especially seniors and working families and individuals,” Deputy Assistant Attorney General Brent Snyder, the head of the department’s Antitrust Division, said in a statement. “Millions of consumers have benefited from competition between Aetna and Humana, and will continue to benefit, because of today’s decision to block this merger.”
Aetna, the nation’s third-largest health insurer, announced its plan in 2015 to buy Humana for $34 billion and become one of the top providers of Medicare Advantage, Murphy notes. The Justice Department sued to block the deal and won. Click here to read the decision.
The Justice Department has also filed suit to block a proposed merger between Anthem Inc. and Cigna Corp., but this case is still pending, Murphy notes.
If approved, the two deals would consolidate the nation’s five largest insurers into three, a list that includes UnitedHealth Group Inc., currently the largest. Murphy notes that the insurers argued that these mergers would help them negotiate better prices with drug companies, hospitals and doctor groups, as well as allow them to spread out the cost of technology investments.