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Aetna trial stuck in a pre-Trump world

Today marked the conclusion of the first week in the trial of the Aetna-Humana merger. Aetna CEO Mark Bertolini testified this afternoon. Bertolini denied that Aetna tried to pressure DOJ into approving the merger. But his emails suggested otherwise; and in one message he said the Obama administration "has a short memory, no loyalty, and very thin skin."

Anthem-Cigna merger trial will resume Monday and the two will continue simultaneously.

As the Aetna trial wraps up week one, many commentators are honing in on the role of CMS as a central question. Aetna’s defense relies on the assertion that CMS is an effective regulator of the Medicare market, including both traditional Medicare and Medicare Advantage (“MA”) to the extent that it can constrain MA prices. This goes beyond the question of market definition; even if the two types of plans are in the same market, Aetna’s defense requires the judge to accept CMS as an effectual competition cop.

What is even less certain about the Aetna trial is how Trump Administration officials could affect the fate of CMS and the Affordable Care Act. When DOJ filed its pre-trial brief, it criticized Aetna for pulling out of ACA exchanges as a blatant attempt at avoiding antitrust scrutiny and asserted that the judge look at pre-complaint conditions as the basis for evaluating competition it the market.

Trump HHS pick Tom Price

“Aetna sought to prevent this Court from even considering the effect of the merger on the exchange markets by announcing, soon after the Complaint was filed, that it would withdraw from the exchanges in Florida, Georgia, and Missouri—the very states that are the subject of Plaintiffs’ claims. But the Court should not allow Aetna to avoid antitrust scrutiny by essentially shuttering its factory.... The Court therefore should evaluate the state of competition in the relevant public exchange markets under conditions existing prior to Aetna’s post-Complaint maneuvering...A firm should not be able to avoid judicial review by withdrawing from a market in an effort to undermine the government’s case - particularly where it can reverse that decision.”

By focusing solely on the past, the DOJ is missing an opportunity to cast doubt on Aetna's argument that CMS will be an effective regulator of competition. In only the past several weeks, the President-elect has made controversial appointments for Secretary of Health and Human Services and the head of CMS, with Tom Price and Seema Verma, respectively. Additionally, all signs point toward Paul Ryan moving forward with his plans to privatize Medicare. But if DOJ begins to discuss the future, Aetna could counter by stating that it is likely that the Affordable Care Act will not even exist a year or two from now. In any case, it would appear that DOJ is not deviating from its choice to only look at the pre-complaint world.

That said, Judge John Bates is likely fully aware of the potential impact that Trump’s appointments could have on CMS’s reach in the marketplace.

The merger trial of Anthem and Cigna resumes next week with phase two but Judge Amy Berman Jackson will be simultaneously writing her brief from phase one. She has not ruled out the possibility that she will make a ruling on phase one alone, but at this point, the trial will be proceeding with phase two as scheduled. Phase two of Anthem will focus on large group insurers and how the merger would affect providers (doctors and hospitals). Both sides have stated in court that they will spend “approximately five minutes” discussing ACA exchanges.

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