First state rejects $37 billion Aetna-Humana merger

First state rejects $37 billion Aetna-Humana merger

First state rejects $37 billion Aetna-Humana merger There could be trouble for supporters of the proposed $37 billion deal between Aetna and Humana.

Following a series of approvals from various state regulators, Missouri Insurance Commissioner John Huff became the first to issue a preliminary order barring the health insurance giants from offering certain plans if they complete the deal first announced last year.

The 43-page order, which was issued Tuesday, directs Aetna and Humana to stop selling comprehensive individual, comprehensive small group and certain Medicare Advantage plans if they move forward with their plans to merge.

Though the order is not yet in effect, industry observers say it could influence the actions other states take when considering consolidation in the health insurance industry.

Specifically, the move could “embolden other states and the DOJ to block the merger entirely,” David Balto, a former attorney within the antitrust division of US Department of Justice, told the St. Louis Post-Dispatch.

Aetna, which plans to acquire Humana, needs to secure 20 state approvals as well as the approval of the Justice Department to complete the deal. So far, the company says it has gained the approval of 10, including California.

Aetna stressed that the Missouri decision does not impede the DOJ approval process, though noting it is “disappointed” with the order, and expects to work with state officials to address concerns. The company has 30 days to submit a replacement plan.

In his order, Huff criticized the merger as decreasing competition in the health insurance marketplace. Specifically, an investigation into the market suggests that Aetna’s market share in indvidiual Medicare Advantage plans would exceed 70% in 33 counties. In the individual market, Aetna is already the largest insurer, and acquiring Humana would bring its share up to 39%.

The Missouri Hospital Association, which was among groups lobbying to block the merger in Missouri, praised the decision.

“[It] will ensure that consumers have access to plans from a competitive marketplace and that providers can continue to negotiate fairly,” Chief Executive Herb Kuhn said. “We appreciate their decision.”

Meanwhile, Martin Gaynor, professor of economics at Carnegie Mellon, says Missouri’s actions may not be enough to block the deal, but if Balto is correct – and other states follow suit – there could be a problem.

“If enough states, or enough big important states, nix the deal, then it becomes a question whether the deal is still worthwhile for Aetna and Humana,” Gaynor said.