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New York state backs Aetna/Humana merger — with conditions

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The $37 billion proposed merger between insurers Aetna Inc. and Humana Inc. has reportedly clinched approval from the New York state insurance regulators.

The New York Department of Financial Services approved the proposed merger with conditions that the combined organization continue to sell Medicare Advantage products in the state and avoid cutting benefits, Bloomberg reported Monday.

The Aetna-Humana deal now has 18 of 20 state endorsements necessary to greenlight the deal, an Aetna spokesman said Tuesday in an email.

A spokesman for the New York Department of Financial Services declined to confirm the approval.

While state endorsements are important, the U.S. Department of Justice's final decision trumps all.

“Certainly to some extent, the DOJ is interested in” the states' decisions, but “the DOJ makes the ultimate call as to whether the facts merit a challenge in federal court,” said Thomas Greaney, formerly with the Justice Department's antitrust division and now co-director of the Center for Health Law Studies at Saint Louis University School of Law.

The state decisions are “based on a broader public interest standard, and they're not antitrust experts,” said David Balto, Washington-based antitrust lawyer and former policy director for the Federal Trade Commission. “The DOJ is not going to defer its antitrust concerns” because certain states have approved the merger.

In May, the Aetna-Humana merger ran in to its first roadblock when Missouri's insurance regulators issued a preliminary order against the deal, labeling it anti-competitive, but gave the insurers time to submit a plan addressing the state's concerns.

Aetna and Humana executives on Friday met with Justice Department officials to present their case for the deal, Bloomberg previously reported. Concerns that the Justice Department opposed the merger prompted Humana shares to drop 14.4% to $154 on Monday from $179.98 on July 6.

There's a general consensus among analysts that the Aetna-Humana deal has a greater chance of securing Justice Department approval than the proposed merger between health insurers Anthem Inc. and Cigna Corp.

Leerink Partners L.L.C. analyst Ana Gupte has maintained that the Aetna-Humana deal has an 80% chance of closing, while the Anthem-Cigna merger has a less than 50% chance of closing, according to recent research notes.

Still, the Justice Department is expected to make a decision on both mergers by mid-July.