May 25, 2016 / 4:50 PM / 4 years ago

Aetna-Humana tie-up is anti-competitive in Missouri-state regulator

(Reuters) - A tie-up of Aetna Inc and Humana Inc would be anti-competitive in Missouri for several types of insurance, including individual Medicare Advantage plans where the combined company would have more than a 50 percent market share, the Missouri Department of Insurance said.

A trader points up at a display on the floor of the New York Stock Exchange August 20, 2012. REUTERS/Brendan McDermid

The department said in an order, dated May 24 and posted on its website, that if the proposed acquisition of Humana by Aetna were to go forward, the companies would need to stop selling individual insurance, small group and certain Medicare Advantage plans in its state.

Missouri is the first state regulator to release findings against the $33 billion deal announced last year.

The deal is being reviewed by the U.S. Department of Justice, as well as state regulators and antitrust authorities, who are also reviewing competitor Anthem Inc’s plan to buy Cigna Corp..

Because the deals will reduce major health insurers to three from five, investors are uncertain they will close.

Missouri’s findings should not influence the Justice Department review, said Dan Mendelson, chief executive of Avalere Health, a Washington D.C. healthcare consulting firm.

But, he said, a similar ruling from a large state such as California could.

Other states are also likely to go public with issues they want Aetna and Humana to address through asset sales or other concessions, Mendelson said.

The American Medical Association, which has expressed reservations about the potential anti-competitive impact of both deals, applauded the Missouri move.

“The Missouri order strongly validates concerns that AMA has expressed to Missouri regulators, as well as the U.S. Department of Justice, and officials in other states impacted by the proposed health insurer mergers,” AMA President Steven Stack said in a statement.

California’s insurance commissioner has held a hearing on the merger’s impact but has not commented.

According to the order, Aetna can submit a plan to the insurance regulator to address the impact of the acquisition.

“This order does not impede the DOJ approval process. We are disappointed with the Missouri order but expect to have a constructive dialogue with the state to address their concerns,” Aetna spokesman T.J. Crawford said.

Aetna has filed for regulatory approval in the 20 states where Humana is domiciled and of those, 15 have approved the deal. In other states where the companies sell insurance, including Missouri, state regulators can choose to review the deal’s impact.

Federal regulators are also examining local insurance competition.

The Missouri insurance regulator said that Aetna held a 36.88 percent share in the comprehensive individual insurance market in 2015 while Humana had 1.93 percent.

In individual Medicare Advantage, Aetna and Humana have more than 70 percent market share in 33 county markets, the department said. Aetna has the largest market share at 33 percent.

Aetna shares rose 1.8 percent to close at $113.69, while Humana shares rose 2.3 percent to $174.70 in New York Stock Exchange trading.

Reporting by Caroline Humer and Bill Berkrot; Editing by Alan Crosby

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