Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Aetna/Humana deal will adversely affect millions of seniors, AHA says, (Sep 8, 2015)

By Greg Hammond, J.D.

The American Health Association (AHA) has warned that Aetna’s proposed $37 billion acquisition of Humana is likely to substantially lessen competition and will harm seniors by making it considerably more difficult for them to obtain affordable, comprehensive health care coverage. The comments were made in a letter, dated September 1, 2015, by AHA Senior Vice President & General Counsel Melinda Reid Hatton to the Department of Justice Antitrust Division and Department of Health & Human Services.

Nearly one in three Medicare beneficiaries—or 16.8 million people—obtains health care coverage through a Medicare Advantage plan, Hatton noted. Humana and Aetna are leaders in this critical market, which is already highly concentrated among a limited number of firms. “Their merger will increase already high levels of concentration even further,” Hatton said, “making the combined company the largest Medicare Advantage insurer in the country with one million more members than the current largest insurer, UnitedHealthcare.”

Combined, Aetna and Humana would provide health care coverage for over 4.3 million people through Medicare Advantage. Over 2.7 million of these seniors live in relevant geographic markets that are or will be highly concentrated, Hatton warned, threatening serious and widespread competitive harm. Specifically, she noted that the Herfindahl-Hirschman Index (HHI) will increase by at least 100 points in 1,083 markets (counties), and by over 200 points in 924 of these markets.

Hatton also posed that Aetna and Humana will not be able to demonstrate that efficiencies overcome the merger’s anticompetitive effects. She noted that while Aetna and Humana might argue that the merger will benefit consumers because the merged entity could force hospitals and physicians to lower their prices, antitrust agencies have found that “countervailing power should not be considered an effective response to disparities in bargaining power between payors and providers.” Hatton noted that the Department of Justice found in the proposed Humana/Arcadian merger that competition from existing Medicare Advantage plans and new entrants was “unlikely to prevent anticompetitive effects in each relevant geographic market.” To the contrary, “Entrants face substantial cost, reputation, and distribution disadvantages that will likely make them unable to prevent Humana from profitably raising premiums or reducing benefits in the relevant geographic markets.”

The proposed Aetna/Humana transaction will substantially lessen competition in 1,083 counties, in 38 states, with over 2.7 million Aetna and Humana members, Hatton claimed.

“The Department has never before been faced with a merger that threatens to destroy competition in the Medicare Advantage market to the extent promised by this transaction,” according to Hatton. “The scope of the likely competitive harm here is so broad and so deep that the amount of divestitures required to preserve and grow competition may not be feasible from a practical standpoint or even preserve the purported business benefits of the transaction.”

Companies: American Hospital Association; Aetna, Inc.; Humana Insurance Co.; Anthem, Inc.; Cigna Corp.

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