In an attempt to appease the Department of Justice and save their proposed merger, Aetna and Humana make deals to sell certain Medicare Advantage assets to Molina Healthcare.
With the Department of Justice (DOJ) formally filing a lawsuit, with the support of 9 states and the District of Columbia, to stop the proposed megamergers between Aetna-Humana and Anthem-Cigna, it’s no surprise the companies in question may try to appease competition concerns.
The DOJ antitrust lawsuit cites the mergers as a potential barrier to innovation in the sector that could also raise healthcare costs. The companies involved in the lawsuit have vowed to fight it and are claiming that a combined company is in the best interest of consumers.
Part of Aetna and Humana’s strategy has included selling off certain Medicare Advantage assets. On August 2, the companies announced that they each have separate agreements with Molina Healthcare to sell Medicare Advantage assets. However, the deals are subject to a successful completion of Aetna’s proposed acquisition of Humana.
Through the deal, Molina will gain nearly 300,000 Medicare Advantage members in 21 states. According to Aetna, the deal addresses a key concern of the DOJ in its challenge of the transaction.
Our agreements with Molina promote competition within the large, diverse, and highly regulated Medicare industry, and ensure that seniors continue to have an abundance of options when they decide how to receive Medicare coverage,” Mark T. Bertolini, Aetna chairman and CEO, and Bruce Broussard, Humana president and CEO, said in a statement. “We believe that these divestitures taken together would address the Department of Justice’s perceived competitive concerns regarding Medicare Advantage.”
If the transition goes through, Aetna and Humana will continue to administer their plans for a transition period.
Another answer to competition concerns comes over recent decisions regarding plans sold on the Affordable Care Act (ACA) marketplace exchanges. Humana had announced plans to reduce its presence in the Obamacare market.
Meanwhile, Aetna also just announced that it would re-evaluate its participation in ACA plans. Aetna became the last of the 5 major health insurers to project a loss on its ACA plans for 2016. As a result, it will scrap plans to expand into 5 new state exchanges in 2017. Aetna expects a loss of more than $300 million for the year on its ACA plans, reported The Wall Street Journal.
In addition, there is some speculation that if the Anthem-Cigna deal breaks apart, Aetna may gain some leverage, according to Fortune.