Department of Justice Requires Divestitures to Preserve Competition for Medicare Advantage Plans

[authors: Helen Kim, and Robert Kidwell]

Under a proposed settlement agreement with the Department of Justice (DOJ), private insurers Humana Inc. (Humana) and Arcadian Management Services, Inc. (Arcadian) must divest certain of Arcadian’s assets in parts of five states in order for Humana to proceed with its $150 million acquisition of Arcadian. 

On March 27, 2012, the DOJ filed a civil lawsuit to block the proposed acquisition, alleging that the deal between Humana, one of the largest Medicare Advantage providers in the country, and Arcadian, an insurer with approximately 62,000 Medicare Advantage members, raised competitive concerns in the market for Medicare Advantage plans.  In its complaint, the DOJ emphasized that Congress intended for Medicare Advantage insurers to compete vigorously, ultimately offering seniors a wider array of health insurance choices, more affordable benefits than traditional Medicare, and more responsiveness to seniors’ demands. 

The DOJ argued that the proposed acquisition would eliminate competition between Humana and Arcadian, and thereby created a combined company accounting for 40 to 100 percent of the Medicare Advantage insurance market in 51 counties and parishes in Arizona, Arkansas, Louisiana, Oklahoma, and Texas.  The DOJ further alleged that eliminating head-to-head competition between the companies would allow Humana to increase prices and reduce the quality of the Medicare Advantage plans sold to seniors in the relevant geographic areas. 

The proposed settlement, which is pending approval from the court, would require the companies to divest certain Medicare Advantage plans to a DOJ-approved competitor.  The proposed settlement would ensure that the buyer(s) of the divested assets would have contracts with nearly all of the same health care providers included in the Humana and Arcadian plans, at substantially the same rates. 

The DOJ’s press release, complaint, and proposed settlement in this matter may be viewed here:

http://www.justice.gov/atr/cases/humana.html

Published In: Administrative Agency Updates, Antitrust & Trade Regulation Updates, Health Updates, Insurance Updates, Mergers & Acquisitions Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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