September 08, 2016

Senators Question Aetna's Billion-Dollar Break-up Fee and Decision to Leave ACA Exchanges After DOJ Challenges Merger with Humana

Text of the letter available here (PDF)

Washington, DC - In a letter sent to Aetna's CEO today, Senators Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Edward J. Markey (D-Mass.), Sherrod Brown (D-Ohio), and Bill Nelson (D-Fla.) raised questions about the company's decision to withdraw from the federal Affordable Care Act (ACA) health care exchanges after the Department of Justice (DOJ) challenged Aetna's proposed merger with Humana.

"Aetna's decision regarding its participation in the ACA exchanges appears to be an effort to pressure the Justice Department into approving a merger that the Department has alleged violates antitrust law and has the potential to significantly harm consumers all across the country," the senators wrote. The senators' letter notes that Aetna had repeatedly expressed commitment to remaining in the ACA exchanges, including as recently as May 2016. But after DOJ began to raise concerns about the merger, Aetna told the agency that its continued participation in the exchanges was conditioned upon the merger's approval.

In a July letter to DOJ, Aetna explained that it would end its participation in the ACA exchanges due to the significant costs the company incurred during its pursuit of the merger. However, as the senators note, when Aetna negotiated the terms of the merger, it included a $1 billion payment to Humana if the acquisition was not completed by the end of 2016.  The Senators raised questions about this "dangerous and irresponsible bet that the Justice Department would not block the deal because Aetna had structured the deal in a way that would cause significant damage to itself and, by extension, to the public exchanges, if it was blocked."

They further stated, "Aetna could not have been surprised at the concerns raised by regulators about this merger...Such scrutiny was widely anticipated because antitrust laws prohibit mergers that substantially lessen competition - and decreased consumer choice, decreased quality of care, and skyrocketing consumer costs were all identified as potential consequences of approval."  

The senators' letter asks Aetna to answer a series of questions about its pursuit of the merger with Humana and about its decisions related to participation in the federal exchanges. A PDF copy of the letter is available here.