Judge Derails Aetna-Humana Megamerger

The deal would substantially reduce competition in the Medicare Advantage market, a judge says in upholding the DoJ's antitrust lawsuit.
Matthew HellerJanuary 24, 2017
Judge Derails Aetna-Humana Megamerger

A federal judge has blocked the proposed $37 billion megamerger between Aetna and Humana, agreeing with the Obama administration that the deal would be anticompetitive.

After a 13-day trial of the Justice Department’s challenge to the merger, U.S. District Judge John D. Bates ruled Monday that it would violate antitrust law by substantially reducing competition in the Medicare Advantage market and in some of the exchanges set up under the Affordable Care Act.

“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,” he wrote in his opinion.

Deputy Assistant Attorney General Brent Snyder said the decision would save consumers and taxpayers up to half a billion dollars each year.

“This merger would have stifled competition and led to higher prices and lower quality health insurance,” he said.

But Aetna said it was “giving serious consideration to an appeal after putting forward a compelling case.” On news of the ruling, Aetna’s stock fell 2.5% to $119.40, while Humana shares rose 2.1% to $204.73 after being down as much as 5.6% earlier in the day.

The Justice Department filed its antitrust lawsuit in July, arguing the merger would lead to higher prices for seniors and the disabled on Medicare as well as people who use the individual insurance program created under the ACA.

In his ruling, Judge Bates rejected the insurers’ claims that the deal would not be anticompetitive because, among other things, traditional Medicare benefits would still be available in markets where Aetna and Humana had both offered Medicare Advantage plans.

The two programs are “at least to some extent, functionally interchangeable,” the judge said.

Andrew Gurman, president of the American Medical Association, said the decision “halts Aetna’s bid to become the nation’s largest seller of Medicare Advantage plans and preserves the benefits of health insurer competition for a vulnerable population of seniors.”

The merger agreement, which was announced in July 2015, is due to expire on Feb. 15. The Justice Department has also challenged the proposed merger between Cigna and Anthem.