AETNA-HUMANA $37B MERGER BLOCKED OVER FEAR IT WOULD HARM CONSUMERS

Kevin McCoy , USA TODAY Published 12:23 p.m. ET Jan. 23, 2017 | Updated 11:44 a.m. ET Jan. 24, 2017

A federal judge Monday temporarily blocked the proposed $37 billion mega-merger between health insurance industry giants Aetna and Humana, ruling that the transaction would reduce competition for consumers.

Although the antitrust decision can be appealed, the outcome could have significant ramifications on how older Americans purchase government Medicare and private Medicare Advantage coverage in the rapidly changing U.S. healthcare market, as well as on the options available to individuals who don't have employer coverage.

The ruling marks a significant setback for the companies, which in July announced the proposed deal to create the largest seller of Medicare Advantage plans, covering more than 4.1 million seniors. Humana could get a $1 billion breakup fee from Aetna if the deal ultimately falls through.

"In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges," U.S. District Court Judge John Bates wrote in his 156-page ruling. "After a 13-day trial, and based on careful consideration of the law, evidence, and arguments, the court mostly agrees."

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.

The decision represents legal vindication for the Justice Department, which was joined by eight states and the District of Columbia in opposing Hartford, Conn.-based Aetna's proposed takeover of Louisville, Ky.-based Humana during the Obama administration. Eight states and the District of Columbia joined the federal action.

The companies contended the deal would not lessen competition. They also said their complementary strengths in technology and relationships with health care providers would benefit consumers. But, calling those arguments "unpersuasive," Bates's ruling concluded that federal regulation would be insufficient to keep the merged firms from raising prices or cutting benefits.

The judge also ruled that neither new health insurance competitors nor business divestitures the companies proposed to address antitrust concerns would replace competition eliminated by the merger.