Close Close

Life Health > Health Insurance > Medicare Planning

Aetna, at antitrust trial opening, defends footprint cuts

Your article was successfully shared with the contacts you provided.

Fighting to save its proposed $37 billion acquisition of Humana Inc., Aetna Inc. raised questions Monday about the future of the Affordable Care Act under a GOP-controlled Congress and the incoming administration of President-elect Donald Trump, as the trial over the insurers’ proposed merger began in a Washington federal court.

Related: 20 biggest new ACA risk corridors failure absorbers

The U.S. Justice Department sued in July to block the deal, calling Aetna’s acquisition of Humana, coming at the same time as Anthem Inc.’s proposed takeover of Cigna Corp., an “unprecedented consolidation in the health insurance industry.”

Antitrust prosecutors contend the Aetna-Humana tie-up would harm senior citizens on Medicare Advantage plans and individuals younger than 65 who seek coverage through the Affordable Care Act exchanges.

A month after the Justice Department sued to block the deal, Aetna pulled out of some exchanges, including those for individual insurance in Florida, Georgia and Missouri.

In his opening statement Monday, DOJ lawyer Craig Conrath, a top lawyer in the department’s Antitrust Division, said Aetna’s retreat from ACA exchanges was an attempt to evade antitrust scrutiny “by the equivalent of closing up shop.”

Conrath urged U.S. District Judge John Bates to still evaluate the “underlying competitive reality.”

“In this case, the evidence was not just subject to manipulation but manipulated,” Conrath said.

“Don’t look at the closed sign, look at the shop behind it,” he added.

Related: Sanders says Aetna move shows need for Medicare for all

Aetna’s chief trial lawyer, John Majoras, a partner at Jones Day, countered that the withdrawal from the exchanges was made to avoid “hundreds of millions in losses” that the insurer, like some of its competitors, has incurred by participating in the ACA exchanges.

“The exchanges, frankly, were always on shaky ground,” Majoras said. There are questions, he said, about “what the Affordable Care Act will look like” in the coming months. Majoras and other lawyers didn’t name Trump, who has vowed to repeal or otherwise replace Obama’s health care law.

Majoras said Aetna’s decision to pull out of most exchanges is irrevocable, meaning that the insurer cannot return to those markets until 2018 at the earliest.

Medicare plan asset deal

In an effort to address separate concerns with the acquisition, Aetna and Humana entered into agreements to sell off Medicare Advantage assets to Long Beach, California-based Molina Healthcare Inc. The divestiture deals, totaling $117 million, are contingent on Aetna and Humana consummating their merger.

Describing Molina as “not a formidable player,” Conrath said the divestiture plan fell short of addressing the antitrust concerns that the deal raises for the Medicare Advantage market.

Related: ACA risk adjustment eats 25 percent of Molina exchange revenue

Majoras argued that antitrust enforcers brought the Medicare Advantage portion of its case without a full appreciation for original Medicare’s role as a competitor and for the regulatory power of the Centers for Medicare and Medicaid Services.

“The government has powerful levers to alleviate any competitive harm that can arguably be created,” Majoras said. “We can’t simply ignore CMS. We can’t pretend they don’t exist.”

Similarly, Majoras said, the government should not underestimate Molina’s role in the market after the divestiture.

“This isn’t some feeble little company, as the government would like to presume,” he said.

Four floors downstairs at the federal courthouse, Anthem on Monday continued to defend its acquisition of Cigna. Anthem’s defense has been undercut in part by Cigna’s apparent reluctance to move forward with the merger.

There is no similar drama in the Aetna-Humana case.

Aetna is based in Hartford, and Humana is based in Louisville, Kentucky.

The Aetna trial is scheduled to last 13 days. After Dec. 31, Humana, represented by Crowell & Moring, could abandon the deal and receive a $1 billion breakup fee. But Aetna and Humana appear resolved to fight for the deal. In August, Conrath said the two insurers are “getting along with each other.”

Bates expects to hand down a decision by the end of January.


10 top ACA reinsurance magnets

3 weird ways PPACA lifeboat programs may affect insurers

Are you following us on Facebook?


© 2023 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.