By Brent Kendall
WASHINGTON -- Health insurers Aetna Inc. and Humana Inc. told a federal judge Friday that their proposed $34 billion merger wouldn't harm consumers, while the Justice Department pressed its position that the combination will suppress competition.
The Justice Department alleges the merger would unlawfully reduce competitors in the market for private Medicare Advantage plans, a government-backed alternative to traditional Medicare for seniors. It also says the deal threatens harm to consumers in three states who purchase insurance plans on Affordable Care Act marketplaces.
"Protecting competition in these markets is critically important," Justice Department lawyer Craig Conrath said during closing arguments in the case, which has been in trial since Dec. 5.
After the government filed its lawsuit, Aetna in August pulled out of insurance marketplaces in 11 states, including the areas covered by the Justice Department's legal complaint. The department says the move doesn't matter, but the insurers said the withdrawal should nullify that part of the government's case.
Aetna lawyer John Majoras said the company left the ACA exchanges for financial reasons, not litigation. "The losses that Aetna suffered were significant," he said.
Mr. Majoras also stressed the insurers' argument that the Justice Department claims of competitive harm in the Medicare Advantage market ignored the fact that most seniors choose traditional Medicare instead, which is always an alternativeto the private Medicare option.
U.S. District Judge John Bates, after being relatively reserved in asking questions during earlier stages of the proceedings, peppered both sides with questions Friday. He spent considerable time asking whether he should consider traditional Medicare as a competitive alternative to the private Medicare plans offered by the insurers, underscoring the importance of the issue. If both options are considered part of the same market, it could prove fatal to the Justice Department's arguments that a merged Aetna-Humana will be dominant.
The judge said seniors "make a choice" on whether to go the public or private route for coverage. "Overwhelmingly they choose original Medicare," he said. But the judge also noted that the companies in their internal business documents never seem to view the government as a competitor in the Medicare market.
In one potential bright spot for the companies, Judge Bates said the market for private Medicare plans is heavily regulated by the government and wondered whether that could limit the ability of a merged Aetna-Humana to engage in anticompetitive behavior.
In possibly problematic comments for the insurers, the judge on multiple occasions questioned the sufficiency of their plan to fix any antitrust problems with the merger by selling off Medicare assets to Molina Healthcare Inc. Under that arrangement, Molina would take over assets representing about 290,000 Medicare Advantage enrollees in 21 states, acting as the competition once provided by Aetna and Humana when they battled each other for business.
Judge Bates said Molina's own documents showed its leadership had concerns about whether it could operate the assets successfully. He also said health-care providers were under no obligation to contract with Molina in the same way they did with Aetna and Humana.
The judge, under tight time pressure to rule in the case next month, held the crucial closing argument session Friday afternoon while much of official Washington was quiet ahead of the New Year's holiday. He said he would issue a decision "in a timely manner."
The Justice Department simultaneously has been challenging the Aetna-Humana transaction and another major proposed industry merger, Anthem Inc.'s proposed acquisition of Cigna Corp. If both deals were allowed to proceed, the transactions would leave the nation with three giant health insurers: the two merged firms and UnitedHealth Group Inc.
The department sued in July to block both mergers, saying they would lead to higher prices and reduced benefits. The lawsuits were among the last major actions by Obama administration antitrust enforcers, who in recent years grew increasingly assertive in seeking to stop mergers they believed would harm consumers.
The Anthem case, taking place in the same courthouse, also is expected to be decided in January.
Write to Brent Kendall at email@example.com
(END) Dow Jones Newswires
December 30, 2016 19:22 ET (00:22 GMT)
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