Seal_of_the_United_States_Department_of_Justice.svgUpdated at 1:15 p.m. with info from press conference, lawsuit and statement from Aetna.

Federal regulators filed a lawsuit today to block Aetna from acquiring Humana, because they allege the merger would reduce competition, harm Americans across the country and lower the quality of care.

The U.S. Department of Justice also has filed a lawsuit to block Anthem’s proposed acquisition of Cigna, for the same reasons.

Attorneys general from eight states — not Kentucky — and Washington, D.C. joined the suit against Aetna.

Aetna, based in Hartford, Conn., and Humana reiterated today that they would “vigorously defend” the merger. An Aetna spokeswoman told Insider Louisville today that the company is focused on presenting its case in court. Humana could not be reached immediately.

Aetna announced last summer that it wants to buy Humana for $37 billion. Humana is based in Louisville, where it employs about 12,500. The companies say that the combined insurance giant would be able to provide better care at a lower cost.

Humana_logoIn their lawsuit, filed in the U.S. District Court in Washington, D.C., the DoJ said that Aetna’s acquisition of Humana “would lead to higher health insurance prices, reduced benefits, less innovation, and worse service for over a million Americans.”

Competition between the companies on Medicare Advantage plans and health insurance plans Aetna and Humana sell on the public exchanges “benefit Americans who can least afford health insurance,” including seniors and families with little income, the feds said.

“The merger would end this rivalry and deny consumers its benefits,” the suit alleges.

“Competition to attract consumers causes insurance companies to offer lower premiums, improved benefits, more attractive networks of doctors and hospitals and more effective care management,” the DoJ said. “This competition is now at risk.”

The feds also said that the merger would:

  • Eliminate significant present and future head-to-head competition between Aetna and Humana
  • Reduce competition generally
  • Cause prices to rise for customers
  • Cause a reduction in quality
  • Reduce competition over innovation and new product development.

Aetna spokeswoman Kristine Grow told IL today that the company believes that the merger is in the best interest of consumers, particularly seniors. Aetna and Humana together can provide more care options, and better service at a lower cost than they can separately.

“The transaction is intended to benefit consumers,” Grow said.

Industry trends pushing insurers to consolidate

William Baer

William Baer

Health insurance companies are trying to merge to counterbalance consolidation among hospitals and other health care providers, which has spiked since the implementation of the Affordable Care Act, a UofL professor has told IL

But the proposed health insurance mergers have drawn significant criticism from federal legislators, presidential candidates, industry and consumer organizations. The DoJ’s antitrust chief, William Baer, had said in March that the proposed mergers demand tough scrutiny.

For months, the DoJ’s antitrust division had been analyzing the proposed merger’s impact on competition, particularly in the Medicare Advantage market, which is one of Humana’s strengths and one of the reasons for Aetna’s interest in the Louisville company.

Aetna had offered to sell billions of dollars in assets to curtail regulators’ concerns about the merger’s impact, but Baer said in a press conference today that those divestitures were woefully inadequate.

Aetna and Humana said in a joint statement that they “plan to vigorously defend” the merger.

Humana today also raised its earnings outlook for this year. The company said it expects to earn adjusted earnings per share of $9.25, up 40 cents from its previous guidance, based in part on stronger-than-expected results from its individual Medicare Advantage business.

While broader markets showed slight declines today, Humana’s shares were up nearly $12, or 7.5 percent in mid-afternoon trading, hovering around $170. Aetna’s shares were up 2.2 percent.