Feds skeptical of Aetna-Humana deal

Department of Justice building

Federal regulators and advocacy groups appear to have stepped up their scrutiny of the Aetna-Humana merger, tempering optimism about the deal's prospects of closing.

For one, the Department of Justice has significant concerns about the health insurance merger, a person familiar with the matter tells Reuters. It's unclear what the concerns were or whether DOJ will challenge the deal.

DOJ officials are set to meet today with representatives from Aetna and Humana to discuss the merger, Reuters adds. Both companies’ stock dropped yesterday amid reports of regulators’ concerns.

The primary issue with the Aetna-Humana deal is its effect on the already highly concentrated Medicare Advantage market, where Humana is a major player--a fact that made it a prime acquisition target.

Earlier this week, news broke that Aetna was preparing to divest some of its MA assets in order to assuage concerns about the deal’s potential anticompetitive effects, increasing some analysts’ optimism about the deal’s likelihood of closing. On such analyst, Leerink Partners’ Ana Gupte, tells Reuters she still thinks Aetna and Humana are having a “productive dialog” with Justice.

Yet in an opinion piece published by The Hill, antitrust lawyer David Balto argues that not only is it vital to preserve competition between Aetna and Humana in the MA market, but “a divestiture is unlikely to be worth more than the paper it is printed on,” given research that shows merger remedies often fail

The divestitures necessary to resolve concerns about competition also are “unprecedented in size and scope,” according to a white paper from groups including Consumers Union and Families USA that criticizes both the Aetna-Humana and Anthem-Cigna mergers.

The Anthem-Cigna deal, meanwhile, is on shaky ground given previous reports that its leaders have been at odds and that federal regulars were skeptical of the companies’ proposed fixes for anticompetitive concerns. Anthem, however, denied reports that the insurers are close to scrapping the deal.

- read the Reuters article
- here’s Balto’s opinion piece
- read the white paper