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Will President-elect Donald Trump affect the outcome of the Anthem-Cigna and Aetna-Humana mergers?
It is hardly enough to say that the election of Donald Trump has caused some uncertainty in the healthcare sector. Entire programs, most notably the Affordable Care Act, may be undone. Reimbursement of Medicare and Medicaid claims may fundamentally change. Subsidies may vanish. Only time will tell whether Mr. Trump’s campaign promises will become reality, and as many pollsters will attest, predictions are inherently hazardous.
But recent developments offer some clues as to how the trend toward consolidation may be affected.
If Trump’s election has changed the fundamental position of the federal government regarding the Anthem-Cigna or Aetna-Humana mergers, nobody has told the lawyers. The Anthem-Cigna trial is in full swing and the Aetna-Humana matter began December 5. Both trials are expected to conclude before Trump’s inauguration.
To the neutral observer, there is simply no suggestion the DOJ’s position on these mergers has softened. Republicans have not been shy about raising concerns with the Obama administration regarding regulatory action in other areas, so the silence regarding these trials may speak volumes.
Even though the DOJ’s core position appears unchanged, Trump’s election certainly has altered the parties’ arguments, especially in the Aetna-Humana matter. The DOJ has argued that the lack of competition on Affordable Care Act exchanges resulting from the merger would harm consumers.
Of course, Aetna withdrew from a number of exchanges prior to the election. At the time, this was perceived as either a tactical gambit to remove a core DOJ argument, political retribution against the Obama administration for bringing the antitrust action in the first place, or both. Now, however, there is substantial doubt as to whether the exchanges will even exist in a few years’ time.
In pretrial pleadings, Aetna has seized on this possibility, arguing that “there are real questions whether the exchanges will exist at all after ACA opponents assume control of the executive and legislative branches early next year.”
For its part, the DOJ claims Aetna’s withdrawal from certain exchanges is meaningless because it could reenter those markets at any time, arguing that “[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.”
But Aetna and Humana may likewise argue that the prospect of reentry is something close to zero given the probability of repeal.
Trump’s selection of Tom Price, a staunch Affordable Care Act critic, for HHS Secretary, certainly is a strong indication that the repeal and replacement of the Affordable Care Act is one promise he intends to keep, even as the precise contours of the “replacement” remain undetermined.
All of this raises fascinating issues for the Court. For example, how should it weigh the DOJ’s arguments concerning completion on the exchanges? Can it assume that the Affordable Care Act will be repealed, or rather, must it consider these arguments in light of the laws and regulations on the books at the time of trial?
This uncertainty also could have the collateral effect of making settlement of either of these matters more challenging. It is clear that the regulatory landscape will be in a state of flux for some time. Repeal and replacement of the ACA, for example, will not happen overnight and still may not happen at all. Insurers may eventually compete more robustly across state lines.
Given this, it is challenging for the parties to meaningfully evaluate traditional settlement concessions like divestments from certain markets, especially where it is unclear if such markets will exist in their current form.
More generally, observers have argued that the potential for fundamental regulatory changes may, at least for a time, cause potential partners to exercise caution. Nevertheless, there will still be clear opportunities for providers, insurers and vendors, and any pause in dealmaking likely will not last long.
Christian Auty is a principal in the Health Care Law practice group at Chicago-based law firm Much Shelist.