Aetna CEO Pushes Back Against Feds’ Opposition To Humana Deal

July 26--HARTFORD -- The chief executive officer of Aetna Inc. is pushing back against the Obama administration's opposition to its proposed $37 billion purchase of Humana Inc.

CEO Mark Bertolini took to Aetna's website to address the U.S. Justice Department's criticism of the deal and a $54 billion proposal by Anthem Inc. to buy Cigna Corp. U.S. officials characterized the transactions as threats to competition, consumer choice and health care quality.

Bertolini framed the issue as an effort by Aetna and Humana to strengthen local health insurance markets, rebutting claims by the Justice Department that the deal jeopardizes the U.S. health care system.

"We are prepared for this. We have a strong case," he said in the brief video. "It's about health care at the local market, not health care at the national level."

In strong terms, Assistant Attorney General William Baer criticized the Aetna and Anthem deals when he and Attorney General Loretta Lynch announced last Thursday the Justice Department's decision to pursue a legal challenge.

"They are unprecedented in their scope and in their scale," he said. "They put at risk the system that Americans across the country rely on to pay for their health care."

Bertolini's video is part of an effort to explain and defend the Humana deal, which the two insurers announced last year. He scheduled a company meeting Monday and sent a letter to Aetna employees last week in which he said combining the two companies would increase choices, improve health care quality, reduce costs and lead to the development of new products.

"The overall strategy of being in the local community, helping people in their homes stay healthy and out of the health care system and achieve their overall ambitions for health is still the same," he said in the video.

Baer said the federal government believes the exact opposite is the case.

"They threaten to increase insurance premiums, to reduce benefits, to lower the quality of health care and slow innovation," he said.

Meanwhile, Standard & Poor's said Aetna's loss of its $37 billion plan to buy Humana Inc. would be a positive development for the company. It placed a "credit watch" on Aetna and Humana, signaling a possible change in their creditworthiness.

In a research note last Thursday, S&P Global Ratings said terminating the Aetna-Humana deal would likely have a positive impact on Aetna's financial risk because it would be required to make a "significant repayment of debt" that had been issued to pay for the deal.

S&P Global Ratings said it could raise its ratings for Aetna if the Hartford-based insurer is forced to abandon the deal. Financing would not be needed and the risks related to absorbing Humana would no longer be an issue, it said.

S&P Global Ratings also said it could lower its ratings because Aetna's intent to litigate could "meaningfully extend the timeline to resolution." Financial leverage and associated debt service could be worse through 2017, the ratings agency said.

Aetna has vowed to fight the Justice Department, insisting that combining Aetna and Humana would result in a broader choice of products and access to higher quality.

S&P Global Ratings applied a credit watch "negative placement" on Humana because the ratings agency may no longer view the company as having "core status" to a newly formed Aetna enterprise by contributing revenue, earnings, cash flow and capital.

Moody's Investors Service downgraded Aetna's debt rating in early June, saying the purchase of Humana could weaken Aetna's financial profile due to a significant "projected increase" in debt, reduced capital and other factors.

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