Judge blocks health insurer Aetna's $34b Humana acquisition

26 January, 2017, 00:40 | Author: Celia Hoffman

The conclusion from Judge John B. Bates of the U.S. District Court for the District of Columbia that a completed merger would be a significant threat to competition in the insurance market was not so surprising as several regulators and organizations spent months urging the government to block it. That's a key business where Aetna and Humana compete with each other, though Humana is the bigger player. Or was this some kind of leverage play, in which Aetna would participate more broadly if the administration played ball with the company's merger plans, using the exchanges as a bargaining chip?

A federal judge on Monday rejected a proposed merger between Aetna and Humana, saying the deal would "be likely to substantially lessen competition" in the Medicaid Advantage market. Still pending is a challenge to Aetna's takeover of Cigna Corp.

California-based Molina reported 2015 revenues of $14 million compared with Aetna's $60 billion and Humana's $54 billion.

When U.S. insurance giant Aetna bailed on several Affordable Care Act healthcare exchanges a year ago, it did so because President Barack Obama's administration filed a lawsuit to block its megamerger with Humana, a federal judge claimed this week.

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"After putting forward a compelling case that addressed each of the Department of Justice concerns, we are disappointed with the court's decision and will carefully consider all available options", Aetna CEO Mark Bertolini and Humana CEO Bruce Broussard wrote. Bates of the D.C. Circuit held that the $34 billion deal woud stifle competition and violate federal antitrust laws. He added that it would be hard, though not impossible, for Aetna to wait for Trump's new antitrust enforcers to be named and then strike a settlement to save the merger, perhaps by offering to divest more assets. Bloomberg reporter Ed Hammond, who covers health-care M&A, tells host Alex Sherman that Anthem's $48 billion deal for Cigna is nearly certainly dead in the water with the decision.

"The Justice Department laid out strong proof at trial that the merger of these two health-insurance giants would have seriously harmed consumers across the country", George Slover, senior policy counsel at Consumers Union, said in a statement cited by Peltz. Sen. "Never thought we would pull the plug all together", Ciano wrote, adding that Aetna was "making money from the on-exchange business".

The judge ultimately decided that Aetna would be likely to continue to offer exchange plans in one of the states, Florida, because the business was profitable, even though the company said it was a business decision.

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