by Grace Schneider , @gesinfk –
Health insurers Aetna and Louisville-based Humana should know this month whether a federal judge will side with the government to block the companies’ proposed $37 billion merger or give it the green light.
After hearing final arguments in U.S. District Court in Washington D.C. on Dec. 30, Judge John Bates told the parties that he’d render a timely ruling in January. And those who watched for signals on how the senior judge was leaning came away with few predictions.
Either way, the companies have indicated that they expect to have answers by Feb. 15, the latest deadline set for consummating their mega-deal. Terms of their sale agreement include a breakup fee of $1 billion if either pulls out before the deadline, which was extended from Dec. 31 to allow time for a decision.
Aetna, whose representatives have commented periodically on major developments in the merger, didn’t issue any statement when the proceedings wrapped up. Spokesman T.J. Crawford said in an email Friday that the company doesn’t weigh in on ongoing litigation.
During a trial last month, the DOJ asserted that the merger would reduce competition in the Medicare Advantage markets across the nation, raising prices on senior citizens and the disabled who use their heath coverage more often more than others. Aetna and Humana lawyers countered that traditional government-run Medicare and private plans offered under Medicare Advantage are different products and compete head to head, providing choices for consumers.
After the government filed suit, the companies tentatively arranged last summer to sell off business with 290,000 Medicare Advantage customers for $400 million to California-based Molina Healthcare to satisfy concerns about overlapping markets in 21 states.
The DOJ introduced evidence during the trial that showed that executives for Molina, which as less than 400 Medicare Advantage customers, worried about having the expertise on hand to take over the more complex line of business. The company’s leaders also shared concerns that the bigger insurers were shedding less attractive business at a bargain, according to published reports.
Both company’s CEOs, Bruce Broussard of Humana and Mark Bertolini of Aetna, took the stand to defend the deal. The DOJ and the companies also enlisted expert economists to support their arguments.
During the final session on Dec. 30, the Wall Street Journal reported, Bates asked the lawyers several questions about whether Medicare could be viewed as an alternative to Medicare Advantage. Seniors “make a choice” about which health coverage to use and they “overwhelmingly” pick original Medicare, the judge was said to have mentioned.
Bates noted that internal company documents don’t indicate that they view the government as a competitor in the Medicare market. Also, because Medicare Advantage is heavily regulated by the government, the oversight would prevent the merged companies from engaging in anti-competitive behavior, the WSJ wrote.
Hopeful signs for the DOJ’s case emerged when Bates questioned the fix proposed by the companies to sell assets to Molina. Besides questions about handling the business, the judge said that providers – hospitals and doctors – aren’t obligated to contract with Molina in the same way they do with Humana and Aetna.
Whatever Bates decides, the ruling is expected to come about the same time as a separate anti-trust case involving the $54 billion Anthem-Cigna merger.
Reporter Grace Schneider can be reached at 502-582-4082 or email@example.com.