Aetna warned: Blocking merger would mean exit

Aetna Inc. warned antitrust officials more than a month ago that it would pull out of Obamacare's government-run markets for health insurance if the United States tried to block its $37 billion merger with Humana Inc.

In a July 5 letter to the Justice Department from chief executive officer Mark Bertolini, Aetna said that challenging the merger "would have a negative financial impact on Aetna and would impair Aetna's ability to continue its support" of plans sold under the Affordable Care Act. That would leave the insurer "with no choice but to take actions to steward its financial health."

Late Monday, Aetna said it had decided to withdraw from Affordable Care Act exchanges in Pennsylvania and 10 other states, citing a second-quarter loss of $200 million on the exchange business because a large number of newly insured people needed high-cost care. Aetna serves about 31,000 Pennsylvanians through the marketplace, about 6 percent of the state's individual health insurance market, according to the Pennsylvania Insurance Department.

The letter, which Aetna said was written in response to a Justice Department request, was first reported by the Huffington Post. Bloomberg obtained a copy from a person familiar with the matter, who provided it on condition of anonymity.

"If the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint," Bertolini wrote. He said that the cost of litigation and debt taken on by Aetna, the need to plan for a breakup fee it would owe Humana, and cost savings from a successful deal would all factor into Aetna's need to pull back.

"By contrast, if the deal proceeds without the diverted time and energy associated with litigation, we would explore how to devote a portion of the additional synergies (which are larger than we had planned for when announcing the deal) to supporting even more public exchange coverage," Bertolini said in the letter.

The Justice Department sued to block Aetna's takeover of Humana on July 21, saying the deal would harm competition in the market for private Medicare plans as well as on the Affordable Care Act exchanges. Aetna made good on its threat Monday, saying it would exit 11 of the 15 state exchanges where it currently offers coverage.

Aetna said in an e-mailed statement Wednesday that its worsening results - not the Justice Department's lawsuit - caused it to pull out of the Obamacare markets, although the lawsuit had hurt the company's finances.

"That deterioration, and not the DOJ challenge to our Humana transaction, is ultimately what drove us to announce the narrowing of our public exchange presence for the 2017 plan year," Aetna said.