- A little over a month after the U.S. Department of Justice filed a complaint on antitrust grounds to block the proposed $37 billion merger between Aetna and Humana, the insurance giants responded saying the deal is "pro-competitive" and will "provide enormous benefits to millions of Americans," court filings show. (Aetna's filing can be found here. Humana's filing can be found here.)
- The health insurance products both companies provide will be improved and more cost-effective if the merger is finalized, the insurers say, adding, the partnership would also encourage accelerated innovation.
- Though one of the main allegations against the merger is that it would significantly reduce competition (particularly in the Medicare Advantage market), the plaintiffs, which include some states, have already agreed that Congress' intent with this market was to create an alternative that would be competitive with Medicare, Aetna's answer states.
During the U.S. Attorney General's announcement of the DOJ's lawsuit against Aetna-Humana, significantly reduced competition was among antitrust regulators' major concerns. The issue over too much market power has been in the spotlight over the past several months. Anthem's $45 billion acquisition of Cigna is also being challenged in court by the DOJ but experts say the Aetna-Humana merger stands a better chance of approval.
Humana's presence in Medicare Advantage is appealing to Aetna though the merger could give the companies control over the market as it would have 25% of all Medicare Advantage enrollees across the country without any divestitures, according to the Kaiser Family Foundation. In 2016, Humana had about 3.2 million enrollees and when combined with UnitedHealthcare's enrollees, the two companies accounted for 39% of enrollment.
One of the controversial components of the DOJ's anticompetitive allegations against Aetna-Humana is how Medicare Advantage plans are defined, with the insurers saying they are "privately administered managed care products" created to increase seniors' options for coverage. A lawyer representing Aetna argued the vast majority of people who are eligible for Medicare coverage opt for Medicare rather than Medicare Advantage plans.
Humana lawyer Kent A. Gardiner said the DOJ's complaint depends on "fundamental misconceptions of the marketplace realities." Aetna lawyer John M. Majoras explained, "Participants can and routinely do switch back and forth between the two (Medicare and Medicare Advantage), and relevant econometric analyses demonstrate that prices for one type of coverage constrain prices for the other, thereby satisfying the applicable legal test for defining a single—and appropriate—market."
DOJ investigators concluded the remedies the insurers have proposed are not enough to address the identified detrimental effects that the merger would have on the marketplace. However, Aetna and Humana maintained they have taken various steps to ensure competition won't be harmed.
Majoras added, "Aetna and Humana have entered into a definitive agreement with Molina Healthcare Inc. to divest Medicare Advantage assets in every one of the Complaint’s 364 alleged geographic markets, thereby alleviating any competitive concerns with respect to the Plaintiffs’ narrowly (and incorrectly) drawn market."
Announcing exits from ACA exchanges has been another strategy Aetna has used to mitigate antitrust concerns, including all 17 counties the complaint identified, according to Aetna's filing. Although Humana also reportedly decided to stop offering plans in certain counties' public exchanges, it denied that its decisions were made to affect the court proceedings. Majoras said Humana is no longer a significant competitor on the public exchanges.
Majoras admitted Aetna had deduced that the the public exchanges continue to be plagued by "substantial risk and volatility." Also, Aetna CEO Mark Bertolini sent a letter to the DOJ early July threatening to leave the ACA exchanges if its pending acquisition was blocked. "We believe it is very likely that we would need to leave the public exchange business entirely and plan for additional business efficiencies should our deal ultimately be blocked," Bertolini wrote.
"Far from the Plaintiffs’ predictions of dire consequences, this merger will improve the delivery of healthcare to millions of people, and will accelerate the industry’s movement toward lower-cost, value-based care that will serve elderly and low- and middle-income individuals and families more effectively and efficiently," Majoras concluded.