A federal judge has blocked a megamerger between health insurance giants Aetna and Humana, ruling that the consolidation would violate antitrust laws and reduce competition.
In a Jan. 23 decision, Judge John D. Bates of the U.S. District Court for the District of Columbia denied Aetna’s $37 billion plan to purchase Humana, following a month-long trial that began in early December. The court was unpersuaded that the efficiencies generated by the merger would be “sufficient to mitigate the anticompetitive effects for consumers in the challenged markets,” Judge Bates said in his opinion.
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The U.S. Department of Justice, which challenged the merger, called the ruling a victory for patients, particularly seniors and working families.
“Competition spurs health insurers to offer higher quality and more affordable health insurance to seniors who choose Medicare Advantage plans and to low-income families and individuals who purchase insurance from public exchanges,” Brent Snyder, deputy assistant attorney general, said in a statement. “Aetna attempted to buy a formidable rival, Humana, instead of competing independently to win customers. 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.”
The Department of Justice, eight states, and the District of Columbia sued Aetna and Humana after an investigation into their proposed July 2015 merger. The government argued that the companies compete head-to-head in the Medicare Advantage and public exchange markets, and that such competition would be lost following the merger to the significant detriment of patients. Aetna and Humana argued their proposed merger would not substantially lessen competition because of the government’s regulatory authority over Medicare Advantage, the threat of entry by new competitors, and the defendants’ proposed divestiture of a portion of their Medicare Advantage business to insurer Molina Healthcare. The insurers also asserted that no current competition between the two companies exists in the 17 complaint counties because Aetna has decided not to compete in those counties in 2017. Judge Bates disagreed.
“The merger would likely substantially lessen competition in the market for individual Medicare Advantage in all 364 complaint counties,” Judge Bates said in his opinion. “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.”
The American Medical Association praised the ruling.
“Elderly patients were the big winners today as a federal court imposed an injunction on Aetna’s $37 billion acquisition of Humana,” AMA president Andrew W. Gurman, MD, said in a statement. “Aetna’s strategy to eliminate head-to-head competition with rival Humana posed a clear and present threat to the quality, accessibility, and affordability of health care for millions of seniors. The AMA applauds the extraordinarily well-documented, comprehensive, fact-based ruling of U.S. District Judge John D. Bates, which acknowledged that meaningful action was needed to preserve competition and protect high-quality medical care from unprecedented market power that Aetna would acquire from the merger deal.”
Another ruling is expected soon in the $48 billion planned merger between Anthem and Cigna, which is also being challenged by the Justice department. A trial in that case wrapped up in late December in front of U.S. District Court for the District of Columbia Judge Amy Berman.
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