States line up to scrutinize Aetna's $33 billion Humana deal

Fri Jul 10, 2015 5:44pm EDT
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By Caroline Humer, Karen Freifeld and Diane Bartz

NEW YORK/WASHINGTON (Reuters) - U.S. insurance regulators and state attorneys general are lining up to scrutinize Aetna Inc's proposed $33 billion takeover of rival Humana Inc for potential harm to consumers, complicating what is already expected to be a tough and lengthy review by federal antitrust authorities.

Insurance commissioners in 18 states including Texas, Kentucky and Florida will study merger documents provided by Humana to determine whether the deal will harm competition and lead to higher insurance premiums or diminished access to healthcare providers, according to Reuters interviews with regulators and insurance experts.

At least three state attorneys general – in Florida, Mississippi and Massachusetts – said they will look at the proposed acquisition. Local politicians and medical industry groups such as the American Medical Association have also voiced concerns about the biggest deal ever in the U.S. health insurance industry.

The Department of Justice is taking the lead on the transaction and may ask for asset sales or challenge a deal in court. But the concerns of state insurance commissioners are likely to have added weight since health insurance is heavily regulated at the local level, antitrust experts said. State regulators are also expected to provide the DOJ with their own data on how the deal will affect insurance markets.

"The antitrust division makes the final decision on the competitive analysis but will take into account the information provided by the states," said Andre Barlow, an antitrust lawyer at Doyle, Barlow and Mazard PLLC, who's not involved in the inquiry.

The proposed acquisition comes after years of health insurance change driven by the politically divisive Affordable Care Act, often called Obamacare. Republicans say the new law has driven insurance costs higher and hurt consumers, while Democrats say it is insuring more people. Aetna and Humana have said that because the health insurance market is now more focused on consumers, being bigger will let them offer more competitive products.

When the nation's largest insurer, UnitedHealth Group (UNH.N: Quote), bought Nevada's Sierra Health Services in 2008, the Nevada Attorney General and the DOJ both filed antitrust complaints and signed off on a settlement requiring UnitedHealth to divest administration and sales of Medicare Advantage plans for seniors and the disabled in two counties.

In 2004, California's state regulator first rejected the acquisition of WellPoint Health Networks by Anthem. The companies challenged the move in court and eventually agreed to concessions, including putting $265 million towards California health projects that would benefit consumers.   Continued...

A trader points up at a display on the floor of the New York Stock Exchange August 20, 2012. REUTERS/Brendan McDermid