Judge nixes $37B megamerger of Aetna-Humana
Harm to consumers cited, but insurance giants may appeal
A federal judge Monday temporarily blocked the proposed $37 billion megamerger between health insurance giants Aetna and Humana, ruling the transaction would reduce competition for consumers.
Although the antitrust decision can be appealed, the outcome could have significant ramifications on how older Americans purchase government Medicare and private Medicare Advantage coverage in the rapidly changing U.S. health care market, as well as on the options available to individuals who don’t have employer coverage.
The ruling 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.
“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 Court 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 findings of head-to-head competition be- tween Aetna and Humana that would be eliminated if the deal were finalized.
The decision represents legal vindication for the Justice Department, joined by eight states and the District of Columbia in opposing Hartford, Conn.-based Aetna’s proposed takeover of Louisville-based Humana during the Obama administration.
The companies contended the deal would not lessen competition. They also said their complementary strengths in technology and relationships with health care providers would benefit consumers. But, calling those arguments “unpersuasive,” Bates’ ruling 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 business divestitures the companies proposed to address antitrust concerns would replace competition eliminated by the merger.
“Today’s decision is a victory for American consumers — especially seniors and working families and individuals,” Deputy Assistant Attorney General Brent Snyder, the current head of the Justice Department’s Antitrust Division, said in an official 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.”
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 non-jury antitrust trial heard by Bates in December. Humana did not immediately respond to a message seeking comment.