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Aetna and Humana remain in discussions with the Department of Justice over approval of their merger, trying to convince federal regulators that their $37 billion deal will be good for seniors in the Medicare Advantage market. But the two firms are prepared to fight in court if their deal is blocked.
While the DOJ is widely expected to issue a decision on the deal within days, both sides were still talking Wednesday, according to people familiar with the discussions who spoke on condition of anonymity because of the sensitive nature of the negotiations.
Regulators are concerned that the Aetna-Humana merger will reduce competition in the Medicare Advantage market. Medicare Advantage plans are a private insurance alternative to traditional Medicare, for seniors over 65 years old. Combined, the two insurers would have 4.5 million Medicare Advantage members, without divestitures.
The insurers have offered up divestitures and secured buyers, with contracts ready to be signed, for assets in local markets where their coverage overlaps, according to one source. But so far, the DOJ has not been convinced by the offer.
"There has been very good dialog," with regulators said a person familiar with the discussion, but no firm demand on how many members the combined company would have to divest. "There hasn't been a lot of dialog about the total situation."
If the DOJ files suit to oppose the deal, the two companies are prepared to fight it in court, but analysts say the fact that both sides are still talking leaves the door open to a possible settlement.
"There's always a negotiation. It probably goes to the 11th hour. If you're the antitrust folks you'd like them to divest as much as you can get them to do," said Dr. David Friend, managing director of BDO's Center for Health Care Excellence and Innovation.
The DOJ has opposed three health insurance mergers in the last 10 years, including Humana's acquisition of Medicare Advantage rival Arcadian Management Services in 2012. All three of those cases were ultimately settled through consent decrees and divestitures within six months of complaints being filed.
The DOJ's antitrust division has reportedly also raised concerns that Anthem's $54 billion acquisition of Cigna will reduce competition, in that case the objections are focused on the market for large employer plans.
A person familiar with the Anthem-Cigna deal said the companies continue to submit data to support their arguments that the deal will provide a benefit to consumers.
While the two deals concern different areas of the health insurance market, physician, hospital and consumer groups have argued that having four of the nation's largest insurers merge would reduce overall competition and result in higher health insurance premiums.
"The DOJ is starry-eyed over five large national insurers becoming three," and continues to make that argument in discussions, according one source.
The insurers have argued that by becoming bigger, they will be better able to negotiate deals with hospital and physician networks. In many local markets provider consolidation has given hospitals much more negotiating power.
"One of the reasons these deals are happening is the need to control operating costs by get better deals from providers... so scale is now very important," explained Deep Banerjee, a credit analyst and director at Standard & Poor's Global ratings. "If the divestitures are too large, then these deals would eventually not make economic sense."
Whether or not antitrust regulators decide to block deals, other market forces will continue to impact consumers said Dr. Friend.
"If they block these deals, prices may yet continue to go up because demographics are driving up prices… drugs are driving up prices and the providers are still consolidating," he said. "No matter what they do, these things are tending to drive prices."
Anthem and Aetna declined to comment about the state of DOJ discussions. And the DOJ did not immediately respond to a request for comment.