Aetna starts bid to salvage Humana deal
Aetna Inc.’s proposal to salvage its $37 billion takeover of Humana Inc. by selling assets to a smaller company isn’t convincing the Justice Department, which told a federal judge that the remedy poses risks for seniors who depend on Medicare.
The insurer that Aetna wants to sell assets to, Molina Healthcare Inc., is unlikely to replace the competition that would be lost from the merger, Justice Department lawyer Craig Conrath said Monday as a U.S. antitrust trial seeking to block Aetna’s acquisition of Humana kicked off in Washington.
“Molina would be no Aetna or Humana,” Conrath told U.S. District Judge John D. Bates. “It’s the consumers — seniors — who face the risk.”
The Justice Department sued Humana and Aetna in July, the same day it filed a complaint seeking to halt Anthem Inc.’s $48 billion acquisition of Cigna Corp. The antitrust lawsuits are aimed at preventing concentration among the biggest U.S. health insurers and protect competition in an industry that President Barack Obama reshaped with the 2010 Patient Protection and Affordable Care Act.
The government argues the Aetna-Humana deal would eliminate competition between the insurers in 364 counties in 21 states and likely force seniors to pay higher premiums for Medicare Advantage, the government-subsidized insurance program for the elderly.
The Justice Department says any attempt to restore competition by Molina’s entry fails because Molina wasn’t successful in its previous foray into the Medicare market. It once offered Medicare Advantage plans in 63 counties and now offers plans that enroll only 424 people, the government said.
Aetna counters that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and original Medicare. By focusing just on Medicare Advantage, the government is portraying the competitive effects of the deal as worse than they really would be.
Even if the markets were separate, Aetna says the asset sale to Molina, with revenue of $14 billion in 2015, would establish a robust competitor against a combined Aetna and Humana.
The other market at issue in the lawsuit is the public exchanges established by Obamacare where individuals buy insurance. Aetna in August announced it would stop selling Obamacare coverage in 11 of the 15 states in which it participated in the program, including all 17 of the Florida, Georgia and Missouri counties where the U.S. has claimed its merger with Humana would decrease competition.
The U.S. argues that Aetna’s withdrawal was aimed at undermining the government’s case and said that nothing prevents Aetna from re-entering those markets after sitting out a year.
“The court shouldn’t look at the closed sign, but at the store behind it,” Conrath said.