Federal judge blocks merger of insurers

Humana, Aetna might appeal

A federal judge Monday at least temporarily blocked the proposed $37 billion mega-merger between health insurance industry giants Aetna and Humana, ruling that the transaction would reduce competition for consumers.

Although the decision can be appealed, the outcome could have significant ramifications on how U.S. seniors purchase Medicare health insurance coverage, as well as on insurance options available to individuals who don’t have employer coverage.

“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,” U.S. District Judge John Bates wrote in his 156-page ruling. “After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the Court mostly agrees.”

The judge based his decision enjoining the merger on evidence of “overwhelming market concentration figures” the merger would generate, plus head-to-head competition between Aetna and Humana that would be eliminated if the deal were finalized.

The companies contended their complementary strengths in technology and relationships with health care providers would benefit consumers. But Bates’ ruling called the arguments “unpersuasive,” and concluded that federal regulation would be insufficient to keep the merged firms from raising prices or cutting benefits.

The judge also ruled that neither new health insurance competitors nor corporate divestitures the companies proposed to address anti-trust concerns would replace competition eliminated by the merger.

In response, Aetna spokesman T.J. Crawford said “we’re reviewing the opinion now and giving serious consideration to an appeal, after putting forward a compelling case” in the nonjury antitrust trial heard by Bates in December.

Humana did not immediately respond to messages seeeking comment on the decision. Neither did the Department of Justice, which opposed the merger on antitrust grounds.

Bates’ opinion marks a significant setback for the companies, which in July announced the proposed deal to create the largest seller of Medicare Advantage plans, covering more than 4.1 million seniors. Humana could get a $1 billion breakup fee from Aetna if the deal ultimately falls through.

Separately, the decision represents legal vindication for the U.S. Department of Justice, which fought Hartford, Conn.-based Aetna’s proposed takeover of Louisville, Ky.-based Humana during the Obama administration. Eight states and the District of Columbia joined the federal action. It is not immediately clear whether the new Trump administration will take a similar legal view regarding any appeal.

The decision theoretically could influence the Department of Justice’s pending antitrust battle to block the proposed merger of two other members of the U.S. “Big 5” health insurance companies. U.S. District Judge Amy Berman Jackson presided over last year’s antitrust trial of the $48 billion plan for Indianapolis-based Anthem to acquire Connecticut-based Cigna.

She is expected to issue a ruling later this month.