Judge rejects Aetna's plan to buy rival health insurer Humana

Jan 24, 2017, 00:27
Judge rejects Aetna's plan to buy rival health insurer Humana

The Aetna-Humana deal is not the only mega-merger between insurers that's now under scrutiny: The proposed $54 billion merger between Anthem and Cigna also faces suit from the Department of Justice over antitrust concerns.

U.S. District Judge John Bates found that to be the case, writing in his decision 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", in 364 counties.

"In that market, which is the primary focus of this case, the merger is presumptively unlawful-a conclusion that is strongly supported by direct evidence of head-to-head competition as well", Bates writes.

An Aetna spokesman says the insurer is reviewing the opinion, and it will give "serious consideration to an appeal". Several news sources previously reported that the mega-merger faced an "uphill battle" in convincing antitrust regulators that consumers wouldn't be harmed by the deal and would in fact benefit from it.

A U.S. District Court is also considering a DOJ suit to block another proposed merger between Anthem and Cigna.

While the ruling could kill the merger, Aetna and Humana could appeal the decision. Humana is the second-largest Medicare Advantage insurer, while Aetna is the fourth biggest.

"Elderly patients were the big winners today", Gurman said. "The wrinkle here is that shortly after the complaint was filed, Aetna announced that it would no longer offer on-exchange plans for 2017 in any of those 17 counties".

Bates' opinion marks a significant setback for the companies, which previous year announced the proposed deal to create the largest seller of Medicare Advantage plans, covering more than 4.1 million seniors.

Aetna updated its forecast in November and said for 2016 it expected to post a pre-tax loss of $350 million. Because the Medicare Advantage market is already heavily consolidated, "there are few large combinations in the industry that would seem feasible", he said. U.S. District Judge Amy Berman Jackson is expected to issue a ruling this month on that merger following a non-jury trial late previous year. That case hinges on whether the merger will reduce competition in the national market, so it's unlikely that decision in the Aetna-Humana case will have much influence over Jackson's decision, said Tim Greaney, co-director of the Center for Health Law Studies at St. Louis University. Shares of Cigna (CI) and Anthem (ANTM) also fell, as their $44 billion merger has also been challenged by the FTC and a judge's ruling is pending.