Today, Humana and Aetna square off against the Department of Justice in one of two antitrust trials that could reshape the health insurance industry.
The Anthem-Cigna trial, which began Nov. 21, already has had its share of interesting moments, with Anthem CEO Joseph Swedish answering questions about the unusual friction between his company and the smaller insurer it is seeking to acquire. Their trial is being conducted in two parts, with the first focusing on the deal's effect on competition in national, employer-based insurance accounts.
The Aetna and Humana trial, by contrast, will focus more on the Medicare Advantage market, where the companies will hold considerable market share if they are allowed to merge. To address the issue, the insurers plan to divest some MA holdings to Molina, but the DOJ has argued that remedy isn't sufficient.
Aetna and Humana have also been much more in sync than Anthem and Cigna, a feat Aetna CEO Mark Bertolini credits to cultural alignment and a proactive integration effort. Still, the deal has not been without controversy of its own.
As their trial kicks off today, here's a look back at how Aetna and Humana's deal has evolved:
- July 2015: Aetna and Humana announced the companies have reached a deal to merge, initially valued at $37 billion, or a purchase price of $230 per share.
- October 2015: Aetna and Humana investors and shareholders voted “overwhelmingly” in favor of the proposed merger.
- November 2015: Consumer advocates and antitrust experts urged state officials to act within their powers to "carefully scrutinize the two major insurer mergers, saying the deal would lead to higher prices for consumers.
- June 2016: Aetna raised $13 billion in a bond sale, replenishing the company's cash reserves ahead of its purchase of Humana.
- July 2016: DOJ officials expressed concerns about the deal's effect on competition in Medicare Advantage markets, sending the stock prices of Aetna and Humana down. Later that month, the DOJ sued to block the merger, arguing that it would stifle innovation, increase prices and reduce product quality.
- August 2016: Aetna and Humana agreed to divest $117 million of their Medicare Advantage assets to Molina in the event their transaction is approved. Meanwhile, Judge John Bates relinquished the Anthem-Cigna case to another judge, meaning the two pairs of insurers will get separate trials. Bates, a George W. Bush appointee, is seen as a more favorable draw than Judge Amy Berman Jackson, who will hear the Anthem-Cigna case.
Aetna then moved to sharply reduce its 2017 Affordable Care Act exchange offerings. A letter also surfaced from Bertolini to the DOJ that implies Aetna's marketplace participation is contingent upon approval of its deal with Humana.
In addition, Aetna and Humana issued their first response to the DOJ suit, alleging that the DOJ’s worries stem from a basic “misconceptions about marketplace realities.”
- September 2016: Prominent Senate Democrats, including Elizabeth Warren and Bernie Sanders, challenged Bertolini about the letter and Aetna's exchange pullout, but he responded that Aetna's marketplace participation was never linked to the outcome of its pending merger.
Aetna’s decision to use the health of millions of Americans as a bargaining chip for its Humana merger is inexplicable & irresponsible.— Elizabeth Warren (@SenWarren) September 8, 2016
- October 2016: Aetna and Humana filed a motion seeking sanctions against the U.S. government, alleging that the Centers for Medicare & Medicaid Services delayed sending documents regarding how to define the Medicare market. But the DOJ fired back, saying the insurers' sanction request is "nothing more than a ploy to shield themselves from evidence that original Medicare and Medicare Advantage are not part of the same relevant product market and that the merger is unlawful.”
- November 2016: Aetna and the DOJ both filed their pretrial briefs that outlined their core arguments. Predictably, the two sides disagree about whether the deal will harm competition in the Medicare Advantage markets and whether the divestiture to Molina is enough to assuage those concerns.