Federal judge blocks Aetna-Humana merger
Judge rules deal would weaken competition and hurt consumers.
A federal judge Monday blocked Aetna’s $37 billion bid to take over rival Humana, saying the merger would weaken competition and harm consumers in hundreds of counties where the two insurance giants compete.
U.S. District Judge John Bates sided with the U.S. Department of Justice and several states that sued to block the deal, arguing that the merged companies would have too great a concentration of two lines of business: Medicare Advantage plans and commercial health insurance plans available on public exchanges. Federal law limits such concentration.
Aetna spokesman T.J. Crawford said it was reviewing the opinion and “giving serious consideration to an appeal after putting forward a compelling case.”
The decision was announced as t wo other insurance behemoths — Cigna and Anthem — await word on whether another federal judge will block their proposed merger. That ruling is seen as imminent.
In a 158-page decision, Bates also rejected the insurers’ assertion that combining the companies would lead to billions of dollars in costs efficiencies, some of which would be passed on to customers. A government expert countered that she calculated only $73.2 million efficiencies.
“On balance,” Bates wrote, “the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the transaction’s anticompetitive effects for consumers.”
During 13 days of testimony, the two sides sparred over how much leverage the merged companies would yield, and whether they would even remain in some of the markets where the government saw anticompetitive effects.
The companies, for example, urged Bates to look not at their concentration of Medicare Advantage alone, but rather their substantially lower concentration of combined Medicare Advantage and original Medicare plans. Bates declined, saying the evidence — from how seniors react to premium increases, and from Aetna and Humana’s own internal documents — is that Medicare Advantage insurers compete with each other more than they do with traditional Medicare.
In 364 counties, Aetna and Humana have enough combined market share in Medicare Advantage that their combination can be presumed to be unlawful. In 70 of those counties, they are the only two sellers.
The companies also argued t h a t t h e me r g e r wo u l d n o t weaken competition in the public exchange marketplace, because Aetna had decided not to compete this year in the 17 counties, all in Florida, where it had previously competed with Humana. But Bates ruled that Aetna pulled out of those counties “specifically to evade judicial scrutiny of the merger,” and said Aetna was likely in the future to offer plans in three of those counties, which he deemed anticompetitive.