Aetna and Humana to defend pending transaction - The Health Section
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Aetna Inc.’s $37 billion deal to buy rival insurer Humana Inc. was blocked by a federal judge, thwarting one of two large mergers that would reshape the U.S. health-care landscape. Aetna said it was considering an appeal.
The transaction would violate antitrust laws by reducing competition among insurers, U.S. District Judge John D. Bates in Washington ruled on Monday. With the deal defeated, Aetna owes Humana a $1 billion breakup fee under the terms of the merger agreement.
“We’re reviewing the opinion now and giving serious to consideration to an appeal after putting forward a compelling case,” T.J. Crawford, an Aetna spokesman, said. A Humana spokesman didn’t immediately respond to a request for comment.
The government case against the merger focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely forced seniors to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges set up under Obamacare, the Justice Department said.
The government case against the merger focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely forced seniors to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges set up under Obamacare, the Justice Department said.
Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and original Medicare, providing more choice for seniors than the government portrayed. Competition on the exchanges isn’t an issue, they said, because Aetna withdrew from all 17 counties at issue in the government’s case.
The judge sided with the government’s view of the Medicare Advantage market. “In that market, which is the primary focus of this case, the merger is presumptively unlawful—a conclusion that is strongly supported by direct evidence of head-to head competition as well. The companies’ rebuttal arguments are not persuasive,” Bates wrote.
Judge John B. Bates ruled the "proffered efficiencies do not offset the anticompetitive effects of the merger." A finalized deal would "substantially lessen" competition in the Medicare Advantage market and public exchanges, the federal judge concluded.
from Bloomberg
The government case against the merger focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely forced seniors to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges set up under Obamacare, the Justice Department said.
Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and original Medicare, providing more choice for seniors than the government portrayed. Competition on the exchanges isn’t an issue, they said, because Aetna withdrew from all 17 counties at issue in the government’s case.
from Bloomberg
The government case against the merger focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely forced seniors to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges set up under Obamacare, the Justice Department said.
Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and original Medicare, providing more choice for seniors than the government portrayed. Competition on the exchanges isn’t an issue, they said, because Aetna withdrew from all 17 counties at issue in the government’s case.
The judge sided with the government’s view of the Medicare Advantage market. “In that market, which is the primary focus of this case, the merger is presumptively unlawful—a conclusion that is strongly supported by direct evidence of head-to head competition as well. The companies’ rebuttal arguments are not persuasive,” Bates wrote.
Commentary (author)
Medicare Advantage plans are not true Medicare (original) plans. They are contracted entities of private insurers. Medicare Advantage plans represent a growing penetration of the overall Medicare market. These advantage plans are contracted and paid by Medicare. They offer their own risk management, quality assurance, and a relatively closed provider network.
The penetration rate varies widely from state to state, county to county, and rural vs metropolitan regions. The Kaiser Foundation offers specific figures on Advantage Plan penetration.
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