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Why a Court Stopped the Aetna-Humana Health Insurance Merger

The Medicare and Medicare Advantage plans along with the Molina divestiture impacted the decision behind blocking the Aetna-Humana health insurance merger.

American Medical Association

Source: Thinkstock

- On January 23, Judge John D. Bates of the Federal District Court for the District of Columbia ruled that the Aetna-Humana health insurance merger would lead to antitrust problems and was not allowed to continue. The Coalition to Protect Patient Choice outlined the decision behind Judge Bates blocking the health insurance merger.

The defense team from Aetna had to argue that the Medicare and the Medicare Advantage health plans belonged to the same market. However, the defense team did not convince Judge Bates who understood that the original Medicare plans were different from Medicare Advantage based on prior court cases.

Judge Bates also looked at a “Hypothetical Monopolist Test” to determine the risk to market competition that the Aetna-Humana health insurance merger could bring. The Department of Justice was able to show more convincing information since the attorneys presented calculations using both their own models and Aetna Medicare Advantage and Original Medicare statistics.

The Department of Justice also had to show that any new concentration in a market from the health insurance merger would cause competitive concerns. Calculations called HHI were used, which shows the size of a market concentration.

“There is no suspense about the outcome of this HHI analysis here: the Aetna-Humana merger easily surpasses the Guidelines’ concentration thresholds in all 364 of the complaint counties,” said Judge Bates. “Indeed, in more than 75 percent of the counties, the post-merger HHI would be greater than 5,000, and in more than 70 percent of the counties, the merger would cause an HHI increase of more than 1,000 points. And in 70 counties where Aetna and Humana are the only MAOs currently in the market, the postmerger HHI would reflect a merger to monopoly.”

Another important point that the court heard was regarding the head-to-head competition between Aetna and Humana in a non-consolidated environment. The federal judge found that the head-to-head competition benefits elderly patients who shop for Medicare Advantage plans through broader networks and decreased costs.

“Together, this evidence suggests that there is significant head-to-head competition between Aetna and Humana, that it drives improvements to plan cost and quality, and that—if the merger were consummated—that competition would be lost, with some resulting deterioration in the Medicare Advantage products offered,” wrote Judge Bates.

The court also had to consider the impact of the Molina divestiture and whether it would be enough to alleviate the issues around market concentration. Judge Bates determined that the divestiture would not be enough to counteract the negative impact the health insurance merger would have on market competition.

In a public statement, Andrew W. Gurman, M.D., President of The American Medical Association, offered his support for the court decision to block the Aetna-Humana health insurance merger.

“Aetna’s strategy to eliminate head-to-head competition with rival Humana posed a clear and present threat to the quality, accessibility and affordability of healthcare for millions of seniors,” Gurman said. “The AMA applauds the extraordinarily well documented, comprehensive, fact-based ruling of U.S. District Judge John D. Bates, which acknowledged that meaningful action was needed to preserve competition and protect high-quality medical care from unprecedented market power that Aetna would acquire from the merger deal. Importantly, Judge Bates further concluded that the merger would unlawfully restrain competition in the sale of individual commercial insurance on the public exchanges in three counties in Florida identified in the complaint.”

“The court’s ruling sets a notable legal precedent by recognizing Medicare Advantage as a separate and distinct market that does not compete with traditional Medicare. This was a view advocated by the AMA, as well as leading economists. AMA also applauds the decision for protecting competition on the public exchanges.”

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