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Will Divestitures Preserve the Health Insurance Mergers?

Aetna and Humana are selling $117 million of their Medicare Advantage assets to Molina Healthcare in order to allay the fears of the Department of Justice.

By Vera Gruessner

As previously reported, the insurance companies Aetna and Humana are attempting to preserve their health insurance merger by divesting millions of dollars in assets in order to satisfy the concerns of the Department of Justice. David Balto, an antitrust attorney based in Washington D.C., wrote that the divestitures would not allay these concerns since both the Aetna-Humana and Cigna-Anthem health insurance mergers would create harm for consumers.

Health Insurance Mergers

“These mergers are likely to harm competition [that would affect consumers] including seniors, working families, employers, as well as doctors and hospitals. Each of these deals poses unacceptable risk to competition,” Principal Deputy Associate Attorney General Bill Baer stated during a press conference.

According to a company press release, Aetna and Humana Inc. announced last week that the two companies entered into separate contracts in which they will sell part of their Medicare Advantage assets to Molina Healthcare, Inc.

These transactions are estimated at $117 million when separating the number of members available in these health plans. These divestitures will allow Molina Healthcare to gain 290,000 Medicare Advantage members across 21 states, according to the release.

“Our agreements with Molina promote competition within the large, diverse and highly regulated Medicare industry, and ensure that seniors continue to have an abundance of options when they decide how to receive Medicare coverage,” Mark T. Bertolini, Aetna chairman and CEO, and Bruce Broussard, Humana president and CEO, said in a public statement. “We believe that these divestitures taken together would address the Department of Justice’s perceived competitive concerns regarding Medicare Advantage. We are confident in Molina’s ability to deliver continued access to quality care for our members in these areas.”

READ MORE: Anthem Appeals Cigna Merger with Cost, Quality Arguments

The states that will be affected by the Aetna Medicare Advantage transaction include Alabama, Arkansas, Florida, Georgia, Illinois, Louisiana, North Carolina, Nevada, Ohio, Oklahoma, Texas, Virginia and West Virginia while the states Delaware, Illinois, Iowa, Kansas, Missouri, Nebraska, Ohio, Pennsylvania, South Dakota and Utah will face transactional changes from Humana Medicare Advantage plans.

This will allow the companies to preserve some form of competition among seniors who are choosing Medicare Advantage health plans. With the Department of Justice questioning the impact these health insurance mergers will make on competition and consumer interests, Aetna and Humana hope these divestitures will bring them more opportunity to pursue their merger.

“We look forward to making our position clear in court, where the facts will show that our combination will result in a broader choice of products, access to higher quality and more affordable care, and a better overall experience for consumers,” Bertolini and Broussard said in the release.

The two companies are hopeful that the lawsuit the Department of Justice has filed will not stand in their way of pursuing these type of health insurance mergers in both the present and the future. Aetna and Humana representatives feel that the merger  “is in the best interest of consumers” including seniors who will be able to choose among Medicare Advantage plans.

Another point to discuss with regard to the health insurance mergers is Anthem’s insistence for a speedy trial, which occurred at the status conference held by the U.S. District Court for the District of Columbia last Thursday, August 4. Anthem is insisting on a quick trial to begin in October regarding its merger with Cigna.

READ MORE: Anthem Pursues Cigna Merger Up to the Supreme Court

Judge John Bates stated that he would not be able to hear both trials in 2016 and one of the cases would need to be sent back for reassignment. Bates did not clarify which of the two cases regarding the health insurance mergers would be held off until next year, but did mention some issues with the claims Anthem put forward.

Anthem stated that its end date with completing the merger was April 30, 2017 and that a speedy trial was necessary so that state Insurance Commissioners had a chance to approve the acquisition. Essentially, the acquisition may fall to pieces if the merger is not completed soon since Cigna is not as committed to the acquisition at this point in time.

Bates stated that he would not be intimidated by the insurance company’s insistence for a speedy trial but would look to set calendar dates at a faster rate than advised by the Department of Justice.

The future for these health insurance mergers will likely depend on the outcome of the court case and whether the companies are able to remain on target for their merger completion dates.


READ MORE: House Committee Passes Bill with Healthcare Merger Implications

Dig Deeper:

Does Blocking Health Insurance Mergers Impact ACA Exchanges?

Department of Justice Moves to Block Health Insurance Mergers


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