The U.S. Justice Department is forcing Humana and Arcadian Management Services to divest themselves of Arcadian’s Medicare Advantage business in parts of five states to secure approval of Humana’s acquisition.
As a procedural move, the Justice Department filed a civil suit in U.S. District Court in Washington, D.C., seeking to stop the proposed acquisition. At the same time, the department also filed a proposed settlement, whereby the health insurer will divest itself of the Medicare Advantage plans in the five states.
If approved by the court, the suit would be settled and the government’s antitrust concerns would be addressed. The deal between Humana and Arcadian, announced in August 2011, was expected to close late last year. Financial terms of the deal were not disclosed.
The divestitures would be of health plans in 51 counties and parishes in Arizona, Arkansas, Louisiana, Oklahoma and Texas. About 71,000 people are enrolled in Medicare Advantage plans in these 51 counties and parishes, accounting for more than $700 million in annual commerce. Arcadian has a total of 62,000 Medicare Advantage members in 15 states.
The department said that the transaction, as originally proposed, would likely have resulted in higher prices, fewer choices and lower quality Medicare Advantage plans purchased by Medicare beneficiaries.
“These divestitures preserve competition so that Medicare beneficiaries, primarily senior citizens, in Arizona, Arkansas, Louisiana, Oklahoma and Texas, benefit from lower prices, better quality services and more innovative products for their health care needs,” Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice’sAntitrust Division.
According to the complaint, the original transaction would have eliminated competition between Louisville, Kent.-based Humana and Oakland, Calif.-based Arcadian, two of the few “significant sellers” of Medicare Advantage plans in 45 of the counties and parishes, allowing Humana to increase prices and reduce the quality of Medicare Advantage plans sold to seniors.
The original deal would have created a combined company controlling between 40% and 100% of the Medicare Advantage health insurance market in these counties and parishes
Under the proposed settlement, Humana must promptly divest the Medicare Advantage plans in the 51 counties and parishes to one or more acquirers approved by the department that has the intent and capability to be an effective competitor.
The department is requiring divestitures of health plans in five additional counties and one additional parish to facilitate the divesture of the plans in the other 45 counties and parishes and make those plans more administrable.
Under the terms of the proposed settlement, current enrollees of Humana and Arcadian’s Medicare Advantage plans will continue to have substantially the same access to providers, including doctors, hospitals and other medical services, after the divestitures as before the divestitures were required. The proposed settlement contains provisions that ensure the buyers of the divested Medicare Advantage plans will have contracts with substantially all of the health care providers included in the Humana and Arcadian plans at substantially the same rates.
The department said the requirements are important because to compete effectively, a health insurer needs a network of health care providers at competitive rates, officials said.
Justice Department tells Humana, Arcadian to divest in five states via IFAwebnews.com .
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