Aetna And Humana May Appeal Ruling Blocking Their Merger

This week, a federal judge blocked the proposed $37 billion merger of health insurance giants Aetna and Humana, ruling that the two companies would significantly reduce competition in the health care market if they teamed up. Now what are the two companies going to do? They might appeal the ruling. Or not.

The Federal Trade Commission and nine states sued last summer to stop the merger. The judge found that a merger would be especially harmful to customers shopping for Medicare Advantage plans. Medicare Advantage is supplemental insurance for Medicare recipients that covers services that Medicare doesn’t.

Some seniors have this coverage as a retiree benefit from their former employers, but there’s also a robust open market that allows recipients to choose their coverage level and insurance company.

Federal investigators found that there were an estimated 364 counties in 21 states where an Aetna/Humana merger would put the combined company’s market share above the point that’s generally considered unlawful.

“We continue to believe a combined company will create access to higher-quality and more affordable care, and deliver a better overall experience for those we serve,” the two insurers’ CEOs said in a joint statement about the decision.

Now the companies have to decide what to do next. A spokesman for Aetna told Reuters that the company was still considering an appeal of the decision to a higher federal court.

Don’t assume that the FTC under the Trump administration will simply approve every merger request that comes its way: its health-care agenda includes more competition in the health insurance market, especially in the Medicare Advantage market. That’s a key business where Aetna and Humana compete with each other, though Humana is the bigger player.

Analysts in the industry told Reuters that the merger probably won’t succeed on appeal. “We see the new Trump Administration as focused on deregulation and driving down prices through competitive intensity in Medicare Advantage,” an analyst with Leerink Partners wrote.

Experts agree that Humana probably won’t extend the closing deadline for the merger past Feb. 15, so the companies will make a decision about their next steps before that.