Aetna Inc.’s proposal to salvage its $37billion takeover of Humana Inc. by selling assets to a smallercompany isn’t convincing the Justice Department, which told afederal judge that the remedy poses risks for seniors who depend onMedicare.

The insurer that Aetna wants to sell assets to, MolinaHealthcare Inc., is unlikely to replace the competition thatwould be lost from the merger, Justice Department lawyer CraigConrath said Monday as a U.S. antitrust trial seeking to blockAetna’s acquisition of Humana kicked off in Washington.

"Molina would be no Aetna or Humana," Conrath told U.S. DistrictJudge John D. Bates. "It’s the consumers -- seniors -- whoface the risk."

The Justice Department sued Humana and Aetna in July, the sameday it filed a complaint seeking to halt Anthem Inc.’s $48 billionacquisition of Cigna Corp. The antitrust lawsuits are aimed atpreventing concentration among the biggest U.S. health insurers andprotect competition in an industry that President Barack Obamareshaped with the 2010 Patient Protection and Affordable CareAct.

Aetna shares fell 3 percent to $129.45 while Humana dropped 2.3percent to $208.83.

Market share

The government argues the Aetna-Humana deal would eliminate competitionbetween the insurers in 364 counties in 21 states and likely forceseniors to pay higher premiums for Medicare Advantage, thegovernment-subsidized insurance program for the elderly.

The Justice Department says any attempt to restore competitionby Molina’s entry fails because Molina wasn’t successful in itsprevious foray into the Medicare market. It once offered MedicareAdvantage plans in 63 counties and now offers plans that enrollonly 424 people, the government said.

Aetna counters that the Medicare market is much larger than theJustice Department claims because it includes both MedicareAdvantage plans and original Medicare, providing more choice forseniors than the government portrays. The U.S. view also ignoresthe power of the Center for Medicare and Medicaid Services, whichoversees the program, to regulate the market, Aetna says.

The government argues that Medicare Advantage is a distinctmarket partly because seniors rarely switch, giving the combinedcompany more power over that market because the deal wouldeliminate one of their options. About 78 percent of MedicareAdvantage enrollees remain with that program from year to year,according to 2013-14 data, said Richard Frank, a Harvard Universityhealth-care economics professor, and the government’s firstwitness. Frank, a former U.S. Department of Health and HumanServices official, testified that just 11 percent will voluntarilychange carriers, 5 percent due so involuntarily and 3 percent die.Just 2 percent are likely to transfer to traditional Medicare, hesaid.

Even if the markets were separate, Aetna says the asset sale toMolina, with revenue of $14 billion in 2015, would establish arobust competitor against a combined Aetna and Humana.

"This isn’t some feeble little company," Aetna lawyer JohnMajoras said.

The other market at issue in the lawsuit is the public exchangesestablished by Obamacare where individuals buy insurance. Hartford,Connecticut-based Aetna in August announced it would stop sellingObamacare coverage in 11 of the 15 states in which it participatedin the program, including all 17 of the Florida, Georgia andMissouri counties where the U.S. has claimed its merger with Humanawould decrease competition.

The U.S. argues that Aetna’s withdrawal was aimed at underminingthe government’s case and said that nothing prevents Aetna fromre-entering those markets after sitting out a year.

"The court shouldn’t look at the closed sign, but at the storebehind it," Conrath said.

While the ACA was meant to make health insurance more accessibleand more affordable to tens of millions of people who lackedcoverage, the law has been beset by legal and political opposition.Enrollment has fallen short of estimates and financial losses haveprompted some companies to withdraw from the market.

Majoras, Aetna’s lawyer, said the decision to leave theexchanges was driven entirely by financial reasons. The insurer’slosses "were huge," he said. With Aetna out of the exchanges, theyshouldn’t be part of the government’s case, he said.

"There is no competition," Majoras said. "There’s nothing to fixhere."

The case is U.S. v. Aetna Inc., 16-cv-01494, U.S. DistrictCourt, District of Columbia (Washington).

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