Aetna and Humana Argue a Merger's Benefits as Antitrust Trial Begins
December 05 2016 - 3:43PM
Dow Jones News
By Brent Kendall
WASHINGTON -- The Justice Department and proposed merger
partners Aetna Inc. and Humana Inc. presented a judge Monday with
starkly different visions of how the transaction would affect the
marketplace, kicking off a second antitrust trial with major
implications for the health insurance landscape.
Opening statements launched the government's second current
court battle against consolidation among health insurers. One group
of Justice attorneys has been on the second floor of the courthouse
here challenging Anthem Inc.'s planned acquisition of Cigna Corp.
On the sixth floor Monday, a different Justice team targeted the
Aetna-Humana deal, arguing the merger would harm senior citizens
who buy private Medicare plans and could hurt consumers who buy
plans on Affordable Care Act marketplaces.
Decisions in both cases are expected next month, likely the last
major tasks for Obama administration antitrust enforcers before
President-elect Donald Trump takes office.
Competition between Aetna and Humana has been "critically
important," especially in the market for private Medicare Advantage
plans, a government-backed alternative to traditional Medicare for
seniors, Justice Department lawyer Craig Conrath told a judge
Monday.
Mr. Conrath said the merger would mean an unacceptable loss of
competition in more than 350 counties where Aetna and Humana
currently compete head-to-head to sell Medicare Advantage
plans.
Mr. Conrath said traditional government-run Medicare is not
enough of a competitor to prevent potential price increases by the
merged company. And the insurers' proposal to fix their deal by
selling more than $100 million in assets to insurer Molina
Healthcare Inc., which is largely focused on Medicaid, wouldn't
satfisfy the need for competition, he said.
"Molina is just not going to have the ability to replace the
lost competition," Mr. Conrath said.
As for the ACA insurance marketplaces, Aetna has withdrawn from
selling coverage on most of the state exchanges in which it
participated, including in the three states that the Justice
Department alleged would be harmed by the merger.
Mr. Conrath, however, said the issue remained relevant. Aetna
"cannot dodge an antitrust problem by closing up shop," he
said.
Aetna lawyer John Majoras said the government's arguments about
the insurance exchanges address "a pretend world, one that does not
exist anymore." He said Aetna, like other insurers, was withdrawing
from the exchanges because it has suffered mounting financial
losses.
Mr. Majoras said traditional Medicare would be a considerable
restraint on a post-merger company and the combined firm would
still need to offer favorable products in order to attract business
from the 10,000 new seniors who age into Medicare every day.
And he said Molina would use the divested assets to emerge as a
considerable competitor. "This isn't some feeble company, as the
government would like to present," he said.
Mr. Majoras and Humana lawyer Kent Gardiner both said the
Centers for Medicare & Medicaid Services, which is part of the
U.S. Department of Health and Human Services, is a powerful
regulator that would discipline the merged company.
CMS sets reimbursement levels and has very specific regulations
for bids by private insurers to offer Medicare Advantage products,
which has meant that prices have remained stable over time, Mr.
Gardiner said. "This is fundamentally different than a purely
private market," he added.
Lawyers for both companies said a merged Aetna-Humana would
combine two complementary firms and create a more balanced business
that could save money and produce better and more innovative
products.
U.S. District Judge John Bates, who is presiding over the case,
didn't ask questions during the opening presentations. Trial
proceedings are set to run through Dec. 30.
The Justice Department filed suit in July to challenge both the
Anthem and Aetna transactions, which if allowed to proceed would
leave the nation with three giant health insurers. In addition to
the two merged companies, the third would be UnitedHealth Group
Inc.
As with the Anthem trial, a large crowd turned out for the start
of the Aetna case, prompting court staffers to open two additional
courtrooms to accommodate all the visitors.
Write to Brent Kendall at brent.kendall@wsj.com
(END) Dow Jones Newswires
December 05, 2016 15:28 ET (20:28 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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