Aetna Starts Bid to Salvage Humana Deal in U.S. Antitrust Trial

(Bloomberg) -- Aetna Inc.’s attempt to assuage U.S. antitrust concerns about its $37 billion takeover of Humana Inc. by selling assets to a smaller company landed with a resounding thud.

The companies are trying to convince a federal judge that the Justice Department’s rejection of the deal was wrong. A trial on the government’s lawsuit started Monday in Washington.

The firm Aetna wants to sell assets to, Molina Healthcare Inc., is unlikely to replace the competition that would be lost from the merger, according a filing by the U.S. Molina was criticized by the government as a junk-rated company whose previous foray into the Medicare Advantage market flopped.

"Today, the companies compete directly against one another," Justice Department lawyer Craig Conrath said in his opening statement. "All this competition would be eliminated by the merger."

The Justice Department sued Humana and Aetna in July, the same day it filed a complaint seeking to halt Anthem Inc.’s $48 billion acquisition of Cigna Corp. The antitrust lawsuits are aimed at preventing the contraction of the national-health insurance market to just a handful of players and protect competition in an industry that President Barack Obama reshaped with the 2010 Patient Protection and Affordable Care Act.

“Health insurance can mean the difference between life and death,” Attorney General Loretta Lynch said when the lawsuits were filed. “If the big five were to become the big three, not only would the bank accounts of American people suffer, but the American people themselves.”

While the ACA was meant to make health insurance more accessible and more affordable to tens of millions of people who lacked coverage, the law has been beset by legal and political opposition. Enrollment has fallen short of estimates and financial losses have prompted some companies to withdraw from the market.

The Hartford, Connecticut-based Aetna in August announced it would stop selling Obamacare coverage in 11 of the 15 states in which it participated in the program, including all 17 of the Florida, Georgia and Missouri counties where the U.S. has claimed its merger with Humana would decrease competition.

“Because Aetna no longer operates in the challenged counties, the merger will have no effect on market concentration or competition,” the company said in a Nov. 23 filing with U.S. District Judge John Bates.

The U.S. argues that Aetna’s withdrawal was aimed at undermining the government’s case and said that nothing prevents Aetna from re-entering those markets after sitting out a year.

Dominant Carrier

Aetna’s acquisition of Humana would leave the carrier dominant in Medicare Advantage coverage for the elderly in 364 counties in 21 states, Justice Department lawyers argued.

Aetna and Humana attorneys claim that Medicare Advantage operates in the same market as the government’s Medicare program and therefore the combined company can’t be dominant.

"To be sure, there may be differences among original Medicare options and Medicare Advantage products, but such differences are not sufficient to support separate markets," the companies said in a filing.

The case is U.S. v. Aetna Inc., 16-cv-01494, U.S. District Court, District of Columbia (Washington).