Aetna and Humana face an uphill battle to win approval of their proposed merger. The Department of Justice believes that this merger will greatly harm competition and won’t benefit consumers. Many of their concerns focus on how the merger will reduce competitors in the Medicare Advantage markets.
On Friday, July 8th, the two companies met with top DOJ officials in an effort to assure them that the deal has public benefits and will not harm consumers, and that divestitures will solve any competitive problems. This deal would create a $34 billion behemoth and severely harm competition in Medicare Advantage. A combined Aetna-Humana company would become the nation’s second-largest health insurer by revenue and the largest seller of Medicare Advantage plans.
Aetna argues that the merger will not harm competition in Medicare Advantage because consumers can use traditional Medicare as a substitute. But such an argument runs counter to a past DOJ action, which concluded that Medicare Advantage is a competitive market distinct from traditional Medicare. Aetna has also floated the idea of divestitures to ease concerns about the deal, but DOJ is unsure whether those remedies can fix the merger.
Aetna has spent at least $119 million trying to get its acquisition approved, but it can’t change the facts. History shows that every major health insurance merger has led to higher premiums and worse service for consumers. Remedies have consistently failed to solve those problems or to restore competition in already concentrated health insurance markets. In a recent letter to DOJ, California Insurance Commissioner Dave Jones pointed out that Aetna and Humana can’t even provide evidence of how the mergers will benefit consumers. Missouri was not fooled by their claims; the Department of Insurance issued an order in late May blocking the merger for being anticompetitive. And consumer advocates are not fooled either; that’s why they have filed comments in nearly a dozen states criticizing the merger and urging that it be blocked.
Instead of trying to sweet-talk regulators into approving a deal that will harm millions of consumers, Aetna should focus on providing better service, improved health care products, and lower prices.