DOJ says Aetna left ACA marketplaces in reaction to merger suit
Updated at 6:35 p.m. with additional testimony.
Washington — Justice Department attorneys on Monday continued to try to undercut arguments by Aetna CEO Mark Bertolini that his company’s Medicare Advantage program competes with government-run Medicare.
The government’s lawyers also spent the day using Aetna’s internal documents and emails to try to prove the insurer’s decision to leave Affordable Care Act marketplaces was driven by the U.S. lawsuit against its planned merger with Humana.
Bertolini was asked by Justice Department attorney Craig Conrath about a document that told board members, “We need to say small competitors are effective competitors,” which the lawyer said was proof there were antitrust concerns about the merger, which would create the largest seller of Medicare Advantage plans in the nation.
“It’s a true statement,” Bertolini responded.
Bertolini also said he had “high expectations” that the merger with Humana would result in more than $3 billion in cost savings and efficiencies.
The Justice Department argues the merger would deplete competition in the Medicare Advantage market, resulting in increased premiums and less choice for seniors. Aetna and Humana say they compete with traditional Medicare when they sell their Medicare Advantage policies. Seniors can chose between either when they reach 65, and both are subsidized by the U.S. government.
On Monday, the start of the second week of the trial that is being heard by U.S. District Judge John Bates, Conrath displayed documents prepared by Aetna which showed that the merger with Humana would have 4.4 million Medicare Advantage customers. An unidentified company — presumably United Healthcare — would have the second largest pool of customers, with several other insurers sharing a very small slice of the pie.
Government attorneys also put economist Aviv Nevo on the stand to bolster their argument that the merger will result in a harmful monopoly in many places in the United States and reduce competition severely in others.
“The proposed merger would increase concentration in already highly concentrated markets,” said Nemo, who once worked at the Justice Department’s Antitrust Division.
The economist cited academic research he said showed Medicare Advantage and traditional Medicare are “two distinct products” and “seniors have different preferences.”
The Justice Department lawyers finished laying out their case Monday. They put several Aetna executives on the stand to try to prove the insurer threatened to pull out of ACA exchanges if the DOJ blocked the $37 billion merger with Humana.
The government attorneys also argued Aetna pulled out of 17 counties in Florida, Georgia and Missouri that were identified by the Justice Department as being hurt the most by the merger solely to nullify that part of the government’s case.
Aetna maintains that last year’s decision to withdraw from most ACA exchanges, including those in the 17 counties under scrutiny, was driven by mounting losses and not the U.S. lawsuit.
On Friday, Bertolini said the insurer was projecting losses of $800 million to $900 million in 2017 from the exchanges and had to do something “to stop the bleeding.”
But the DOJ argues that it wasn’t until the lawsuit to block the merger was filed in July that Aetna indicated it would leave the exchanges; in fact it indicated it had plans to expand into marketplaces in other states.
During Monday’s questioning of Aetna Executive Vice President Steven Kelmar, a DOJ attorney released a “talking point” memo written by Kelmar to Bertolini to prepare him for a meeting with Department of Health and Human Services Secretary Sylvia Burwell before the DOJ filed suit against the merger in July.
It urged Bertolini to say “by getting the deal done, I can make the commitment that we will expand our exchange footprint.”
The DOJ attorneys pointed out that even in states where Aetna has left the ACA exchange, it continued to sell individual commercial policies “off exchange” to preserve its option to re-enter the exchanges.
Kelmar said he always thought the ACA business was a money-loser and disagreed with Bertolini when he favored expansion.
“I always supported leaving all the public exchanges,” he said.
Aetna President Karen Lynch also was questioned about internal documents and emails that showed the company executives discussed leaving the 17 counties listed in the DOJ complaint just days after the lawsuit was filed.
Another e-mail from Kelmar to Lynch about Aetna’s decision to quit exchange businesses in 536 counties said, “Most of this is a business decision except where DOJ has been explicit about the exchange market. There we have no choice.”
Bates asked Lynch if she had looked at the economic performance of Aetna’s ACA business in the 17 counties in question before she backed the decision to quit that business.
“I have not specifically looked at those,” Lynch said.
In other emails, Aetna executives were cautioned against putting anything about the decision to leave ACA exchanges in writing.
Aetna Vice President Jonathan Mayhew, who is in charge of the company’s exchange business, acknowledged he had been told to keep strategy discussions about the 17 counties verbal so there wouldn’t be written communication that could be unearthed by the Justice Department during discovery for the litigation.
The Aetna-Humana merger trial is set to run through Dec. 30. A decision from Bates is expected on the case in January.
In another courtroom in the same federal courthouse, a legal challenge to the $54 billion merger between Anthem and Cigna continued Monday.
That trial is presided over by U.S. District Judge Amy Berman Jackson.
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