• by Thom Forbes  @tforbes, January 24, 2017

A federal judge ruled yesterday that the proposed $37 billion merger between Aetna and Humana would be anticompetitive, particularly when it comes to seniors in the Medicare Advantage marketplace. The ruling casts doubt on the likelihood that a similar pending alliance between Anthem and Cigna, already under fire on multiple fronts, will get a green light from the courts and regulators.

“The government case against the Humana takeover focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued that the combination of Aetna and Humana would eliminate competition between the insurers in 364 counties in 21 states and probably would drive up seniors’ premiums for Medicare Advantage plans,” write David McLaughlin, Zachary Tracer and Andrew M Harris for Bloomberg.

“Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and government-administered Medicare, providing more choice for seniors than the government portrayed.” 

Judge John Bates of the U.S. District Court for the District of Columbia, a George W. Bush appointee, wrote that “the Court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anti-competitive effect for consumers in markets the deal affects,” in a 158-page decision, writes James F. Peltz for the Los Angeles Times.

“The Justice Department laid out strong proof at trial that the merger of these two health-insurance giants would have seriously harmed consumers across the country,” George Slover, senior policy counsel at Consumers Union, said in a statement cited by Peltz. Sen. Richard Blumenthal (D-Conn.) called the ruling “a decisive victory for jobs, consumers and healthcare.” The American Medical Association  also applauded the decision.

“The judge based his decision enjoining the merger on evidence of ‘overwhelming market concentration figures’ the merger would generate, plus findings of head-to-head competition between Aetna and Humana that would be eliminated if the deal were finalized,” Kevin McCoy elaborates for USA Today.

“We're reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case,” an Aetna spokesman said. Humana “stands to receive a $1 billion breakup fee from Aetna should the deal be abandoned,” Reuters’ Diane Bartz reports, making the ruling a bit easier for it to swallow.

Arnall Golden Gregory LLP attorney Jeffrey Jacobovitz tells Bartz that appeals at the D.C. Circuit succeed about one-third of the time and can take a year to resolve. “He added that it would be difficult, though not impossible, for Aetna to wait for Trump's new antitrust enforcers to be named and then strike a settlement to save the merger, perhaps by offering to divest more assets,” Bartz writes.

“The Justice Department said the court’s decision would save customers and taxpayers up to $500 million a year,” report Brent Kendall and Anna Wilde Mathews for the Wall Street Journal. “Aetna attempted to buy a formidable rival, Humana, instead of competing independently to win customers,” said deputy assistant attorney general Brent Snyder. 

Regarding the looming decision of Indianapolis-based Anthem's proposed $54 billion acquisition of Bloomfield, Conn.-based Cigna, Randal Schultz, a partner at Lathrop & Gage and chair of the firm's healthcare strategic business planning practice group, tellsBecker’s Hospital Review’s Morgan Haefner: “I'll be shocked if the other case doesn't come down the same way.”

The New York Post’s Josh Kosman reported last week that a decision from Judge Amy Berman Jackson, also with the U.S. District Court for the District of Columbia, will come soon and sources say she will also rule against a merger on antitrust concerns. Anthem is expected to appeal; Cigna reportedly wants out of the troubled deal.

Putting it all in perspective, the New York Times’ Reed Abelson and Leslie Picker write that “insurers had embarked on a frenzy of deal making a year and a half ago. The proposed combinations promised to reshape the industry by shrinking the number of the largest insurers to three, from five; the largest, UnitedHealth Group, remained independent.

“Today, the industry finds itself in arguably an even greater state of flux, with President Trump and the Republican-controlled Congress having vowed to repeal the Affordable Care Act and replace it with something else, the details of which are unknown. Monday’s decision adds to the uncertainty facing the industry.”

But, considering our aging, deconditioned population and the fact that the industry has the largest lobby in D.C. by far, we not-so-boldly predict that it will remain on its feet.