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Hospital group pushes back on Aetna-Humana merger

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The American Hospital Association says the proposed $37 billion merger between rival health insurers Aetna Inc. and Humana Inc. would pose a substantial threat to competition within the health insurance marketplace, particularly its fast-growing Medicare Advantage segment.

Melinda Reid Hatton, the AHA's senior vice president and general counsel, warned federal antitrust regulators that the combination of Aetna and Humana — the nation's third- and fourth-largest publicly traded health insurance companies, respectively — would result in a single entity dominating the Medicare Advantage market in more than 1,038 counties across 38 states.

“The deal will not just eliminate current competition between Humana and Aetna, it will eliminate future competition between them,” Ms. Hatton said in a 33-page report sent Tuesday to the U.S. Justice and U.S. Health and Human Services departments, outlining the proposed merger's potential negative effects on the health insurance industry.

Aetna is already the nation's fourth-largest player in the Medicare Advantage market, the report notes, and combining it with Humana — the second-largest Medicare Advantage insurer in the U.S. — could make it prohibitively difficult for other insurers to even enter into geographic markets in which the joint company plans to operate.

Both Aetna and Humana have said that the combined company intends to continue expanding its footprint in Medicare Advantage, potentially resulting in even further market concentration, the AHA's report said.

“The merger would eliminate the possibility of competition between Aetna and Humana in markets which Aetna plans to enter,” Ms. Hatton said in the report. “The Department should study carefully Aetna's (and Humana's) expansion plans to determine the degree to which both current and future competition will be sacrificed should this deal be completed.”

The report also cast doubts over whether Aetna will be able to live up to its promise to mitigate anticompetitive effects of the merger with Humana by selling off its overlapping business units.

“Even if it were feasible, it would be a staggering task to develop, implement and supervise a divestiture package that would remedy harm to competition over such a broad area,” Ms. Hatton said. “The scope of the likely competitive harm here is so broad and so deep that the amount of divestitures required to preserve and grow competition may not be feasible from a practical standpoint or even preserve the purported business benefits of the transaction.”