Saturday, July 23, 2016

Justice Department sues to block Aetna's takeover of Humana

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The U.S. Department of Justice has filed lawsuits to block the sale of Louisville-based Humana Inc. to Aetna Inc. and of Cigna Inc. to Anthem Inc., on grounds that consolidation of the health-insurance market will reduce competition and hurt consumers. Observers expect a protracted court battle, involving negotiations with the department's anti-trust division, reports Grace Schnieder of The Courier-Journal.

"Of the two deals, analysts and investors see Aetna and Humana as having a slight chance to reverse the decision," report Caroline Humer and Carl O'Donnell of Reuters. Aetna "faces a tough but not impossible legal battle." Also, "Aetna may also gain some leverage if the Anthem-Cigna deal breaks up first, according to some antitrust experts."

The Justice Department's major focus in the Humana-Aetna case is Medicare Advantage, the alternative insurance for seniors. "The two companies now compete in more than 600 counties, nearly 90 percent of the counties where Aetna offers Medicare Advantage plans," Schneider notes. "That fierce competition has led to lower premiums, better benefits, better provider networks and improved coordination of care, the suit said." It also said smaller insurers "lack the scope and scale" to compete.

Reuters reports, "Aetna will argue in court that the Justice Department defined the market for Medicare Advantage too narrowly, which has caused it to see competition issues where they do not exist, Chief Executive Officer Mark Bertolini said in an interview. The government has failed to take into account that seniors can not only choose between Medicare Advantage plans sold by private players, but also have the government-run Medicare program as an option. . . . The Justice Department has already rejected that argument. However, Aetna will use evidence that the Obama administration envisioned Medicare and Medicare Advantage as direct competitors as it sought support for the Affordable Care Act passed in 2010."

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