A federal judge in Washington today blocked Aetna Inc.'s proposed $37 billion acquisition of Humana, punctuating an era of antitrust enforcement under the Obama administration that broke up merger deals in a host of industries.
The U.S. Justice Department sued in July to block Aetna's deal and also moved to block Anthem Inc.'s proposed $54 billion acquisition of Cigna Corp. Antitrust enforcers alleged the two mergers would amount to an "unprecedented consolidation in the health insurance industry."
In the suit against Hartford-based Aetna and Louisville, Kentucky-based Humana, government lawyers alleged the merger would hurt competition in the market for private Medicare Advantage plans, a government-backed alternative to traditional Medicare.
"The court has some serious concerns regarding the companies' efficiencies claims," U.S. District Judge John Bates, who presided over the 13-day trial, wrote in his 158-page ruling. "It is very likely that a significant share of the claimed efficiencies may be retained by the merged firm rather than being passed on to consumers.
Bates called the merger "presumptively unlawful" in the market for private Medicare Advantage plans.
He said his conclusion "is strongly supported by direct evidence of head-to-head competition as well. The companies' rebuttal arguments are not persuasive."
The Justice Department had also alleged that—in 17 counties across Florida, Georgia and Missouri—the deal would reduce competition for health insurance sales through the Affordable Care Act exchanges.
While the deal was still being reviewed, Aetna told federal antitrust regulators that it would reduce its presence on the exchanges in 2017 if the Justice Department sued to block the Humana deal. Aetna later delivered on that threat.
In his decision Monday, Bates found that Aetna pulled out of the exchanges in those 17 counties "specifically to evade judicial scrutiny of the merger."
Aetna's lawyers, led by John Majoras, a Jones Day partner, at trial defended the health insurer's withdrawal from Affordable Care Act markets.
Majoras said Aetna made the decision not in response to the government's lawsuit but as a business decision to avoid "hundreds of millions in losses" that the insurer expected from continued participation in the exchanges.
