Humana CEO Defends Aetna Merger With Tale of First Encounter
(Bloomberg) -- Humana Inc. Chief Executive Officer Bruce Broussard extolled his company’s fit with rival Aetna Inc. as the insurers began making their case for combining in a $37 billion deal that the U.S. seeks to block.
Broussard told the judge who will decide whether to let the deal proceed that he and Aetna CEO Mark Bertolini hit it off when they first met.
“We almost finished each other’s sentences,” Broussard said Tuesday, recalling his rainy day encounter with the Aetna CEO in which they shared their “passion” for making a difference in their industry. On the witness stand, he described the “complementary capabilities” of their companies.
Humana’s head was the first defense witness called after Justice Department lawyers rested their case on the seventh day of the antitrust trial in Washington. The U.S. seeks an order blocking the deal as harmful to seniors in 21 states who are insured by the government’s Medicare Advantage program.
Aetna and Humana dispute the notion that the program, which functions like a health maintenance organization, is sufficiently distinct from the original fee-for-service Medicare program to qualify as a separate market. In any case, the Center for Medicare and Medicaid Services regulates both programs so closely that their combined companies couldn’t dominate it, they contend.
Broussard’s characterization of his Bertolini meeting stands in stark contrast to the combative relationship between health insurers Anthem Inc. and Cigna Corp., which are fighting a U.S. lawsuit aimed at halting their $48 billion tie-up in a trial before a different federal judge in the same courthouse. Even as Anthem and Cigna mount a common defense in court, each accuses the other of violating their agreement.
The government filed both suits in July, attempting to avoid contraction of that industry to just a handful of major players. Humana’s Broussard told U.S. District Judge John Bates on Tuesday that market retrenchment after the 2014 activation of the Affordable Care Act prompted his Louisville, Kentucky-based company to search for a suitor.
Humana, which derives 75 percent of its business from the government’s Medicare programs, is unique in the health-care market, making it a natural merger candidate, he said. It was also losing money on insurance exchanges set up under Obamacare.
“It was terrible,” Broussard said of a three-year period in which it lost about $1.5 billion. Humana and Aetna are withdrawing from some Obamacare exchanges, a move the U.S. has alleged was motivated not by financial losses, but an effort to win antitrust approval.
Humana has withdrawn from ACA coverage in at least four of the 15 states where it handled that business, Broussard told Justice Department lawyer Eric Mahr on cross-examination. Asked if it was exiting all of the exchanges, Broussard said the government was one of Humana’s largest customers and that the insurer was trying to support its efforts.
The case is U.S. v. Aetna Inc., 16-cv-1494, U.S. District Court, District of Columbia (Washington).