A federal judge has blocked the proposed $37 billion merger between health insurance giants Aetna and Humana, on antitrust grounds. U.S. District Court Judge John D. Bates in Washington, D.C., ruled Monday that the deal would “substantially” reduce competition in the Medicare Advantage market.
After a 13-day trial, the court harshly shot down Aetna’s argument that Hartford, Connecticut-based Aetna pulled out of public Obamacare exchanges in 17 counties in 11 states for purely financial reasons. Bates also expressed doubts that the merged company would create operating efficiencies that could lower health insurance premiums.
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“[T]he Court has some serious concerns regarding the companies’ efficiencies claims. It is very likely that a significant share of the claimed efficiencies may be retained by the merged firm rather than being passed on to consumers,” Bates wrote in his 156-page opinion.
Bates called out Aetna CEO Mark Bertolini and other leadership for making the Obama administration’s approval of the merger a condition for Aetna’s continued presence on the public health insurance exchanges.
“During the investigation but before the complaint was filed, Aetna tried to leverage its participation in the exchanges for favorable treatment from [the U.S. Department of Justice] regarding the proposed merger,” the judge wrote.
Aetna first announced its intention to buy Louisville, Kentucky-based Humana on July 2, 2015. Weeks later, two other major health insurers, Anthem and Cigna, said they would merge, in a deal first said to be worth $48.4 billion, but later pegged at $54 billion.
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The DOJ sued July 21, 2016 to block both transactions, saying that the mergers would reduce the number of large, national private payers from five to three. Aetna on Aug. 15, 2016, announced plans to leave exchanges in 11 of the 15 states where it had been offering such coverage.
According to Bates:
On May 11, 2016, Bertolini was deposed in DOJ’s investigation. At that deposition, Aetna’s counsel stated that if Aetna was not “happy” with the results of an upcoming meeting regarding the merger, “we’re just going to pull out of all the exchanges.” … Bertolini affirmed his counsel, stating “Nice.”
On July 5, 2016, Bertolini wrote a letter to DOJ that seemed to tie exchange participation to merger approval. The Huffington Post made that letter public a month and a half later, not long after Aetna announced its plans to leave the exchanges. In the aftermath of that revelation, Aetna denied to Politico any link between the exchange exit and the antitrust suit.
“This is persuasive evidence that when Aetna later withdrew from the 17 counties, it did not do so for business reasons, but instead to follow through on the threat that it made earlier,” Bates wrote. Internal Aetna documents and emails that came out during the trial were even more “persuasive,” according to the judge.
A Humana spokesman told MedCity News via email that the two companies were reviewing the ruling. Beyond that, there was no comment.
If the deal is not completed by Feb. 15, 2017, Aetna will owe Humana a $1 billion breakup fee. The D.C. federal court’s ruling makes that deadline all but impossible to hit.
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