Judge blocks Aetna-Humana health insurance merger on antitrust grounds
The proposed $34-billion merger of Aetna Inc. and Humana Inc. to form one of the nation’s largest health insurers was blocked Monday by a federal judge on antitrust grounds.
The ruling by U.S. District Judge John Bates in the District of Columbia was a victory for the Justice Department, which under the Obama administration sued to stop the deal.
In his decision, Bates agreed with the agency’s assertion that the deal would threaten competition, especially in the market for seniors who buy privately operated Medicare health plans called Medicare Advantage.
“Federal regulation would likely be insufficient to prevent the merged firm from raising prices or reducing benefits,” and there is “valuable head-to-head competition between Aetna and Humana which the merger would eliminate,” Bates wrote.
His decision raises questions about whether another huge health-insurance merger, Anthem Inc.’s proposed $48-billion purchase of Cigna Corp., might be in peril as well. The Justice Department also sued to block that deal for antitrust reasons; the case is being heard by a different judge.
In the Aetna-Humana case, Aetna spokesman T.J. Crawford said the insurer was reviewing the opinion and “giving serious consideration to an appeal.” Humana had no immediate comment.
Martin Gaynor, a professor of economics and health policy at Carnegie Mellon University, said an appeal “would be an uphill battle” because Bates’ ruling was “pretty clear and decisive” and the judge “didn’t give much credence to many of the [insurers’] analyses.”
Aetna, based in Hartford, Conn., agreed to its deal with Louisville, Ky.-based Humana in mid-2015. The deal calls for Aetna to acquire Humana for cash and stock valued at about $230 per Humana share.
Both companies’ stock prices fell immediately after Bates’ ruling but Humana’s shares then rallied; they closed up 2.2% at $205.02 a share. Aetna’s shares finished down 2.7% at $119.20.
The combined company would have annual operating revenue of more than $115 billion and more than 33 million members in medical plans.
Aetna and Humana also said they expected to wring $1.25 billion in annual cost savings from the merger by 2018, which would “support our efforts to drive costs out of the system and offer more affordable products.”
But in his 158-page ruling, Bates wrote that “the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anti-competitive effect for consumers” in markets the deal affects.
Some consumer groups praised 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.
Another critic of the deal, Sen. Richard Blumenthal (D-Conn.), called Bates’ ruling “a decisive victory for jobs, consumers and healthcare.”
“Mega-mergers like the proposed consolidation of Aetna and Humana raise prices, lower healthcare quality and kill jobs,” Blumenthal said in a statement.
The Justice Department’s lawsuits against the healthcare mergers, filed in July, were among the last major law-enforcement actions taken by the Obama administration, and it’s unclear how aggressively the Trump administration will pursue corporate deals on antitrust grounds.
During the campaign, President Trump often railed against big business and said in October that his administration would not approve AT&T Inc.’s $85.4-billion purchase of Time Warner Inc. “because it’s too much concentration of power in the hands of too few.”
Trump’s nominee for U.S. attorney general, Sen. Jeff Sessions (R-Ala.), said at his confirmation hearing that he would not have a problem blocking mergers.
“I have no hesitation to enforce antitrust law,” Sessions told members of the Senate Judiciary Committee on Jan. 10. “I have no hesitation, if the finding justifies it, to say that certain mergers should not occur, and there will not be political influence in that process.”
Times staff writer Jim Puzzanghera in Washington contributed to this report.
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UPDATES:
2 p.m.: This article was updated with comments from Consumers Union and a Carnegie Mellon professor, and with stock closing prices.
12:05 p.m.: This article was updated throughout with Times staff reporting.
11:30 a.m.: This article was updated throughout with additional details.
This article was originally published at 9:40 a.m.
