Humana-Aetna merger trial begins Monday
The trial that will determine whether Aetna gets to buy Louisville-based Humana began Monday in federal court in Washington, D.C.
LOUISVILLE, Ky. (WDRB) -- The trial that will determine whether Louisville-based Humana Inc. gets swallowed up by Aetna began Monday in federal court in Washington, D.C.
U.S. District Judge John Bates is set to rule in January whether to allow the $37 billion deal to go forward over the objection of the U.S. Justice Department, which sued last summer to block the transaction on anti-trust grounds.
On the first day of the two-week trial, lawyers for both sides sketched out the same broad arguments they had advanced in written court filings, according to an account from Reuters.
The government argues that Aetna and Humana would have too much market-power in Medicare Advantage, the privately run alternative to traditional Medicare, the government's healthcare program for seniors.
Humana and Aetna have said the government's case falls apart if traditional Medicare is considered a "competitor" to Medicare Advantage, which the companies believe it should.
The merger has big implications for Louisville, where Humana provides more than 12,000 high-paying jobs and is the state's biggest corporate headquarters.
Since the deal was announced in July 2015, company executives have sought to reassure Louisville by saying the city could end up with more jobs as the headquarters of Aetna’s division dedicated to government business like Medicare Advantage.
But if that’s true, it will only be after a considerable amount of shuffling as two companies combine and cut “duplicative” positions.
In a pre-trial brief, Aetna and Humana referenced a report by one of their hired experts explaining how the companies would achieve $2.8 billion in annual savings from combining -- savings will eventually flow, in part, to consumers.
The expert listed six potential "efficiencies" from the combination, the first of which was the "elimination of duplicative personnel."
The other areas of savings, in the words of expert Rajiv Gohkale, are:
- moving Aetna’s relatively cost-inefficient Medicare business onto Humana’s relatively cost-efficient Medicare business
- IT reductions, such as moving to a single email server system
- procurement savings, based on the merged entity’s ability to move its procurement costs onto more favorable existing contracts
- pharmacy cost reductions through consolidating contracts and moving Aetna’s outsourced pharmacy to Humana’s in-house pharmacy
- clinical cost savings, including the benefits of moving Humana’s claims-review process to Aetna’s proprietary technology
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