Aetna, Humana fire back at feds over DOJ attempt to block merger

"Aetna building in Hartford, Connecticut" by Ragesoss is licensed under CC BY 2.5

The Department of Justice does not understand the health insurance market, especially where it concerns Medicare Advantage, Humana said in its response to the Department of Justice's injunction against its merger with Aetna.

In its July lawsuit, the Justice Department said Aetna's $37 billion acquisition of Humana would lessen competition between the companies on Medicare Advantage plans and with products sold on the Obamacare exchanges.

The DOJ's arguments against the merger are "grounded in - and depend entirely on - fundamental misconceptions of the marketplace realities," Humana's attorney Kent A. Gardiner of Crowell & Moring LLP, said in the August 19 response.

Aetna also filed a response on August 19.

[Also: Letter shows Aetna warned DOJ it would exit Obamacare markets if merger challenged]

While Humana admitted it offers Medicare Advantage in nearly 90 percent of the counties where Aetna offers Medicare Advantage, Aetna said the insurers have entered into an agreement with Molina Healthcare to divest the product in 364 geographic markets, said Aetna attorney John Majoras.

Of the 1.7 million seniors enrolled in Medicare Advantage plans, 980,000 are enrolled through Humana or Aetna, Humana said.

A Kaiser Family Foundation report published in July said if the deal between Aetna and Humana proceeds, the consolidated entity would provide coverage to more than one-quarter, 26 percent, of all Medicare Advantage enrollees nationwide, making it the leading Medicare Advantage insurer, ahead of UnitedHealthcare, which has 20 percent of all Medicare Advantage enrollees.

Humana and Aetna also argued that the government failed to take into account that Medicare Advantage plans compete with traditional Medicare, and that consumers can switch between the two.

[Also: Aetna and Humana trial set for Dec. 5, later than companies had hoped]

The "Big 5," Humana agreed - Aetna, Anthem, UnitedHealth, Cigna and Humana - would be reduced to three if Aetna acquires Humana and the merger between Anthem and Cigna for $54 billion goes through.

Humana said it is the second largest Medicare Advantage insurer, as measured by enrollment, and that government-sponsored products accounted for over 75 percent of its $54 billion revenue in 2015.

The trial over the DOJ injunction regarding anti-competitive and anti-trust concerns is set for Dec. 5.

Aetna will pay a $1 billion breakup fee to Humana if the merger does not come to fruition on or by Dec. 31, 2016.

Twitter: @SusanJMorse