Court Blocks Aetna-Humana Merger; Rules That Aetna Misled the Public

U.S. Federal Judge John D. Bates blocked the $37-billion Aetna-Humana merger yesterday, in a decision that says Aetna misled the public on why it was pulling out of ACA insurance exchanges in 15 states. Bates says that Aetna tried to play hardball with the federal government, threatening to pull out of the exchanges if the Department of Justice went ahead with it’s antitrust lawsuit and then doing so when the suit was filed.

Bates ruling sais that Mark T. Bertolini, Aetna’s CEO “expressed this sentiment in a July 5, 2016, letter to DOJ (and forwarded to Secretary Burwell) where he stated: ‘if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint’; ‘we would also withdraw from at least five additional states’; and if the merger is blocked, ‘we believe it is very likely that we would need to leave the public exchange business entirely.’”

Jonathan Mayhew runs Aetna’s exchange business and that the company should pull out of the exchanges altogether because it “has continued to deteriorate as the year has progressed.” But under questioning, Mayhew admitted that “he had been told to keep strategy discussions … verbal so there wouldn’t be written communication that could be shared with the Justice Department during discovery for the litigation.” 

Bates concluded:

“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. After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the Court mostly agrees.

Most importantly, the merger would likely substantially lessen competition in the market for individual Medicare Advantage in all 364 complaint counties. This conclusion is based on identification of the proper product market, the overwhelming market concentration figures generated by the merger, and the considerable evidence of valuable head-to-head competition between Aetna and Humana, which the merger would eliminate. The companies’ rebuttal arguments are unpersuasive: federal regulation would likely be insufficient to prevent the merged firm from raising prices or reducing benefits, and neither entry by new competitors nor the proposed divestiture to Molina would suffice to replace competition eliminated by the merger.

The merger would also be likely to substantially lessen competition on the public exchanges in three Florida counties. Because Aetna’s withdrawal from the public exchanges in the 17 complaint counties was to avoid antitrust scrutiny, the Court gives that evidence little weight in predicting whether Aetna will continue to compete on the exchanges in the future. The Court concludes that the merger is likely to substantially lessen competition on the exchanges in the three counties in Florida where Aetna is likely to compete in the future. The Court’s conclusion is again based on the level of market concentration and the evidence of substantial head-to-head competition between Aetna and Humana that would be lost. Neither of defendants’ rebuttal arguments is persuasive. There is insufficient evidence to conclude that Humana’s market share will decline such that the merger would not increase market concentration or that the markets are too volatile to reasonably predict the anticompetitive effects of the merger.

Finally, the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anticompetitive effects for consumers in the challenged markets. Therefore, for all these reasons, the proposed merger of Aetna and Humana will be enjoined. A separate Order has issued on this date.” 

Source: United States District Court for the District of Columbia