December 5, 2016 / 4:26 PM / 8 months ago

U.S. attorneys argue Aetna-Humana deal violates antitrust law

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

WASHINGTON (Reuters) - A U.S. Justice Department attorney told a federal judge on Monday that health insurer Aetna Inc's planned acquisition of Humana Inc would break antitrust law by reducing competition in Medicare Advantage and Obamacare exchange businesses, kicking off a trial expected to last weeks.

The Justice Department filed a lawsuit in July asking the court to stop Aetna's $34 billion deal for Humana, arguing it would lead to higher prices for seniors and the disabled on Medicare and for people who use the individual insurance program created under the Affordable Care Act, popularly known as Obamacare.

Aetna defended the deal on Monday, arguing that Medicare Advantage competes with the government's traditional Medicare program for elderly or disabled patients. It also said that it plans to stay out of the Obamacare exchanges in the near future.

Both programs, as well as antitrust enforcement, could face changes under Republican President-elect Donald Trump.

Justice Department lawyer Craig Conrath told Judge John Bates of the U.S. District Court for the District of Columbia that traditional government-managed Medicare does not compete with Medicare Advantage, which is run by insurers.

A witness called by the government, Aetna executive Nancy Cocozza, president of Aetna's Medicare Business, was shown internal documents that appeared to show that Aetna considered Humana a major competitor but not original Medicare. The documents were not visible in the court.

Shown one assessment of top competitors that did not have Medicare, Cocozza protested, "These are MA (Medicare Advantage) competitors but there are others."

Conrath also said that Aetna's plan to largely exit the Obamacare exchanges in 2017 should be disregarded because the company could re-enter the market as soon as 2018 if it chooses. Conrath said written communications showed that Aetna left Obamacare because of the antitrust lawsuit.

Aetna has said it would not return to the exchanges until 2019 at the earliest.

Share prices of both companies dropped Monday. Humana closed down 2.2 percent at $208.83 while Aetna was down 3 percent at $129.45.

Aetna attorney John Majoras argued that traditional Medicare and Medicare Advantage did compete, citing a U.S. government website. There could soon be more competition, he said, noting "entry has been common and it has been widespread."

Majoras also argued that the Obamacare exchanges were unprofitable and said that was the real reason the company planned to drop out of 11 of the 15 states where they are on the exchanges. "The result to Aetna has been mounting losses," Majoras said. "Humana's losses were actually even a bit worse."

The Justice Department filed another lawsuit in July to stop Anthem Inc's planned $45 billion purchase of Cigna Corp. That trial is underway in the same courthouse. The trials will be over before Trump's inauguration on Jan. 20. He has pledged to repeal and replace Obamacare and has said Medicare should be modernized.

Humana is the second largest Medicare Advantage insurer while Aetna is the fourth, and the two compete in more than 600 counties, the government said in its complaint.

Reporting by Diane Bartz and Caroline Humer; Editing by Jonathan Oatis and Leslie Adler

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