A federal judge has rejected health insurer Aetna Inc.'s plan to buy rival Humana Inc. for about $34 billion and become a major player in the market for Medicare Advantage coverage.
U.S. District Judge John Bates says in an opinion filed Monday that he largely agrees with federal regulators who contended that such a combination would hurt competition.
An Aetna spokesman says the insurer is reviewing the opinion, and it will give "serious consideration to an appeal." A Humana spokesman didn’t immediately respond to a request for comment.
The ruling is another victory for antitrust enforcement efforts initiated by the Obama administration. A separate Justice Department challenge, against Anthem Inc.’s $48 billion bid for Cigna Corp., is also pending a ruling. Investors saw the Aetna-Humana ruling as a bad sign for that deal: Anthem shares fell 1.4 percent late Monday morning, while Cigna lost 0.7 percent.
“If the judge blocked this deal, there is very little, if any, chance that the Anthem-Cigna deal gets cleared,” Jason McGorman, a Bloomberg Intelligence analyst, said by e-mail. He added that analysts and investors had thought that the Aetna-Humana deal “had a better chance of settlement/clearance” than Anthem-Cigna.
The two deals would consolidate the nation's five largest insurers into three, a list that includes UnitedHealth Group Inc., currently the largest.
The big insurers argued that by getting bigger they will be able to negotiate better prices with pharmaceutical companies, hospitals and doctor groups that also are growing. They also expect to cut expenses and add more customers, which helps them better spread the cost of investing in technology to manage and improve care.
The Obama Justice Department frustrated a slew of mega-mergers amid a wave of record deal-making, including Comcast Corp.’s attempted takeover of Time Warner Cable Inc., Halliburton Co.’s deal for Baker Hughes Inc. and AT&T Inc.’s bid for T-Mobile US Inc. The Trump administration is taking over investigations into AT&T’s deal for Time Warner Inc. and Bayer AG’s proposed combination with Monsanto Co.
The government case against the Aetna-Humana merger focused on the market for private health plans for the elderly, known as Medicare Advantage. The U.S. argued the Aetna-Humana deal would have eliminated competition between the insurers in 364 counties in 21 states and likely forced seniors to pay higher premiums for Medicare Advantage plans. It also threatened competition on the insurance exchanges set up under Obamacare, the Justice Department said.
Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and original Medicare, providing more choice for seniors than the government portrayed. Competition on the exchanges isn’t an issue, they said, because Aetna withdrew from all 17 counties at issue in the government’s case.
The judge sided with the government’s view of the Medicare Advantage market.
“In that market, which is the primary focus of this case, the merger is presumptively unlawful—a conclusion that is strongly supported by direct evidence of head-to head competition as well. The companies’ rebuttal arguments are not persuasive,” Bates wrote.
This story will be updated.