Judge blocks Humana-Aetna merger - WDRB 41 Louisville News

Judge blocks Humana-Aetna merger

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LOUISVILLE, Ky. (WDRB) --  A federal judge has blocked Aetna's proposed takeover of Louisville-based Humana, calling the merger anti-competitive.

The ruling deals a severe blow to the $37 billion merger, which has been in the works since July 2015.

The companies are reviewing the order, Humana spokesman Tom Noland said. Aetna told the Wall Street Journal it is considering appealing.

In blocking the tie-up, U.S. District Judge John D. Bates agreed with the Obama administration’s Justice Department that a combined company would control too much of the Medicare Advantage market in 364 counties across the U.S.

Bates said the deal would  “substantially lessen competition” for Medicare Advantage plans in those counties. Medicare Advantage is a privately run version of the government’s health insurance program for seniors.

The companies had unsuccessfully argued that original, fee-for-service Medicare should be considered a competitor to Medicare Advantage -- in which case, their merger poses no antitrust problems.

Under the terms of the deal, Humana could walk away and collect a $1 billion breakup fee from Aetna.

The deal has big implications for Louisville, where Humana employs more than 12,000 and is the No. 1 contributor of paycheck taxes to Metro government.

Executives have said that Louisville would end up with more jobs as a division of Aetna, but the deal would mean losing the biggest company headquartered in Kentucky.

Louisville Mayor Greg Fischer is “optimistic about the future of Humana, whatever the outcome of the merger,” Fischer spokesman Chris Poynter said Monday. "He believes Humana will continue to be a strong company and an entrepreneurial backbone for the city."

But Kent Oyler, CEO of Greater Louisville Inc., the metro chamber of commerce, called the ruling a “setback” in a prepared statement. Oyler has said the merger would be good for Louisville, where Aetna had planned to base its government insurance division.

“Both companies have invested a significant amount of time and energy into the proposed merger. Today’s ruling is a setback for what appeared to be a symbiotic relationship,” Oyler said. “We know Humana and Aetna’s legal teams are reviewing the ruling and will do what’s best for both companies and their employees moving forward.”

Gov. Matt Bevin tweeted that the ruling was “disappointing news” and said the case is likely to be appealed.

Analyst: other companies could bid for Humana

Assuming the Aetna takeover falls apart, one Wall Street analyst said Monday that Humana could seek other buyers, with competitors Cigna and Anthem as likely bidders.

Anthem and Cigna are also fighting the government over their proposed merger, and a different judge has yet to rule in that case.

In a note to clients, Ana Gupte of Leerink Partners said Cigna would be the “most likely” bidder for Humana, followed by Anthem.

In email to WDRB News, Gupte said the antitrust issues that hampered the Humana-Aetna deal might not apply to a Humana-Cigna or Humana-Anthem merger. Cigna and Anthem have a smaller presence in Medicare Advantage, and the geographic footprint of each merger would be evaluated separately, she said.

Gupte added in her note that non-competitors like CVS Health Corp. and Express Scripts could consider bids for Humana.

She said the market for Medicare Advantage plans – Humana’s specialty – should grow with lighter regulation under the Trump administration and possible “legislative changes” from the majority-Republican Congress that would favor more private-company involvement in Medicare.  

Humana derives two-thirds of its $54 billion annual revenue from Medicare Advantage.

Below is a copy of the judge's opinion:

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