Judge Blocks Health Care Merger, Saying It Would Hurt Competition

Enlarge this image toggle caption Jessica Hill/AP Jessica Hill/AP

A federal judge has ruled against the proposed acquisition of the health insurance company Humana by its larger rival, Aetna.

The decision is a victory for former President Obama's Justice Department, which sued Aetna last year to block the $34 billion merger, NPR's Yuki Noguchi reported.

The suit alleged that the merger would hurt competition in the health care market, leading to higher prices for consumers and fewer services for Medicare patients.

U.S. District Judge John Bates found that to be the case, writing in his decision that, "the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges" in 364 counties.

Medicare Advantage plans are privately run but reimbursed by Medicare.

Bates also spent a considerable chunk of the 158-page decision analyzing Aetna's decision, announced last summer, to withdraw its insurance plans from 17 counties where Aetna and Humana both sold plans on the public exchanges.

The company also pulled back from 11 of the 15 states in which it offered individual plans in 2016, as we reported.

As NPR's Scott Hensley reported at the time:

"Aetna said the pullback was a business decision stemming from a loss in the second quarter on individual plans and uncertainty about the policy outlook for the exchanges. "In the company's statement, [Aetna CEO Mark] Bertolini said, 'As a strong supporter of public exchanges as a means to meet the needs of the uninsured, we regret having to make this decision.' ... "Bertolini was talking up the business potential of the exchanges as recently as April, when he said during a call with analysts and investors that the exchanges were 'a good investment,' despite the losses incurred."

Bertolini and his company "have long been supporters of the public exchanges," today's decision noted.

But, as Scott also reported, a letter leaked to reporters last summer indicated Aetna CEO Mark Bertolini had tied his company's decisions about participating in the exchanges to the Justice Department's decision on the merger. In the letter to the DOJ, Bertolini wrote, "if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint."

The company subsequently did just that.

In his Monday decision blocking the merger, Bates found, "Aetna tried to leverage its participation in the exchanges for favorable treatment from DOJ regarding the proposed merger."

He found Aetna had withdrawn from the 17 counties where it competed with Humana "at least in part for the purpose of improving its litigation position" in the government's lawsuit against it.

The judge concluded that Aetna would be likely to do business in the future in those 17 counties, and that, as a result, "The merger would also be likely to substantially lessen competition on the public exchanges in three Florida counties" that were among the 17.

Yuki reported Aetna said it was reviewing the opinion and is considering an appeal.

"Meanwhile, the same court is considering another case brought by the Justice Department's antitrust division against the proposed merger of Anthem and Cigna," she reported. "A decision in that case is also expected soon."