Aetna-Humana antitrust trial wraps up before questioning judge

Aetna headquarters in Hartford

Aetna

Aetna headquarters in Hartford

Washington — The antitrust trial over a proposed merger between Aetna and Humana wrapped up Wednesday, with U.S. District Court Judge John Bates asking probing questions of both Justice Department lawyers seeking to block the deal and attorneys for the insurers defending their plan.

During closing statements, Bates asked the lawyers for both parties if the deal violated antitrust laws if the Justice Department had only managed to prove the $37 billion merger would result in unacceptable lack of competition in one county or one state.

Justice Department attorney Eric Mahr said it would. Aetna’s lawyer, John Majoras, said the Justice Department did not prove there would be a violation of antitrust laws anywhere.

The DOJ, which sued to block the merger in July, aimed to prove several things during the two-and-a-half week trial.

It had to undercut the insurers’ argument that the merger would not dramatically reduce competition in the Medicare Advantage market across the nation, raising prices and reducing coverage for America’s seniors.

The insurers say traditional Medicare would provide competition everywhere.

Mahr pressed the government’s argument that traditional pay-for-service Medicare and Medicare Advantage are two different products. Medicare Advantage plans cover doctors and hospital visits, like traditional Medicare, but usually limit patients to a network. Traditional Medicare gives patients an unlimited choice of providers.

Medicare Advantage plans also cap out-of-pocket costs at $6,700 a year or less for a policyholder and can provide more generous prescription drug coverage than Medicare.

Mahr said seniors who “age in” to Medicare or Medicare Advantage make a choice and don’t often change from one to the other, although a number switch from one Medicare Advantage plan to another.

“There is a lot of completion within those paths but not between those paths,” Mahr said.

He told Bates that in 2013 and 2014 only 2 percent of traditional Medicare customers switched to Medicare Advantage.

The DOJ also said Molina, a company that has agreed to purchase 290,000 Medicare Advantage customers in areas where the merger could reduce competition, isn’t capable of servicing these policies, for which the California-based company paid a “fire sale” price of $400 million.

Mahr said Molina has failed twice trying to enter the Medicare Advantage market and has fewer than 400 Medicare Advantage customers.

“I think everything shows this is an extremely risky proposition,” Mahr said.

Majoras countered, “There will be excellent competition in those markets.”

The DOJ also questioned why Aetna decided to leave the Affordable Care Act exchanges in 11 states – including Florida, Georgia and Missouri. The government identified 17 counties in those three states where it said the merger would result in anticompetitive harm.

“They withdrew from the 17 counties to improve their litigation position,” Mahr said.

Aetna argues it quit the exchanges because it was losing money selling policies in those marketplaces because its customers were older and sicker than the general population.

Bates asked  Majoras “is there affirmative evidence that the 17 counties were chosen for business reasons.”

Majoras responded that Aetna CFO Shawn Guertin had testified “that if you look at the financial information that came into the company,” there was no other option than to leave those counties.

“Aetna has been hemorrhaging money. Humana has been hemorrhaging money,” Majoras said.

Aetna CEO Mark Bertolini and Humana CEO Bruce Broussard took the witness stand during the trail, as well as other executives from both companies and from Molina. A series of competing economists, armed with a dizzying array of slides and graphs, tried to discredit each other’s arguments and conclusions.

Attorneys for the government and for the insurers will be able to make one more pitch to Bates.

On Dec. 30 they will come back to court to allow each side to make a final, 90-minute argument. Bates, a Republican appointee, is expected to make his decision in mid-January.

In another courtroom in the same federal courthouse, the antitrust trial involving the proposed Anthem-Cigna merger continues and has been extended into early next year.

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