[Federal Register Volume 77, Number 178 (Thursday, September 13, 2012)]
[Notices]
[Pages 56674-56676]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22389]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF JUSTICE
Antitrust Division
United States v. Humana Inc. and Arcadian Management Services,
Inc.; Public Comment and Response on Proposed Final Judgment
Pursuant to the Antitrust Procedures and Penalties Act, 15 U.S.C.
16(b)-(h), the United States hereby publishes below the comment
received on the proposed Final Judgment in United States v. Humana Inc.
and Arcadian Management Services, Inc., Civil Action No: 12-cv-464-RBW,
which was filed in the United States District Court for the District of
Columbia on September 5, 2012 together with the Response of the United
States to the comment.
Copies of the comment and the response are available for inspection
at the Department of Justice Antitrust Division, 450 Fifth Street NW.,
Suite 4100, Washington, DC 20530 (telephone: 202-307-6456), on the
Department of Justice's Web site at http://www.justice.gov/atr, and at
the Office of the Clerk of the United States District Court for the
District of Columbia, 333 Constitution Avenue NW., Washington, DC
20001. Copies of any of these materials may be obtained upon request
and payment of a copying fee.
Patricia A. Brink,
Director of Civil Enforcement.
United States District Court for the District of Columbia
United States of America, Plaintiff, v. Humana Inc. and Arcadian
Management Services, Inc., Defendants.
Case: 1:12-cv-00464 (RBW).
Response of Plaintiff United States to Public Comment On the Proposed
Final Judgment
Pursuant to the requirements of the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b)-(h) (``APPA'' or ``Tunney Act''), the
United States hereby responds to the public comment received
regarding the proposed Final Judgment in this case. The single
comment received agrees that the proposed Final Judgment will
provide an effective and appropriate remedy for the antitrust
violations alleged in the Complaint. The United States will move the
Court for entry of the proposed Final Judgment after the public
comment and this response have been published in the Federal
Register, pursuant to 15 U.S.C. 16(d).
I. Procedural History
On August 24, 2011, Humana Inc. (``Humana'') and Arcadian
Management Services, Inc. (``Arcadian'') entered into a merger
agreement whereby Humana agreed to acquire all of the outstanding
shares of Arcadian for approximately $150 million. The United States
filed a civil antitrust Complaint on March 27, 2012, seeking to
enjoin Humana from acquiring Arcadian, alleging that the acquisition
likely would substantially lessen competition in the sale of
individual Medicare Advantage plans in forty-five counties and
parishes in Arizona, Arkansas, Louisiana, Oklahoma, and Texas (``the
relevant geographic markets''), in violation of Section 7 of the
Clayton Act, 15 U.S.C. 18. At the time the complaint was filed,
Humana provided health insurance to approximately 35,000 Medicare
Advantage enrollees in the relevant geographic markets, and Arcadian
provided health insurance to over 14,700 Medicare Advantage
enrollees in those markets. The loss of competition from the
acquisition likely would have resulted in higher premiums and
reduced benefits and services in the relevant geographic markets.
Simultaneously with the filing of the Complaint, the United
States filed a proposed Final Judgment and Stipulation signed by the
Plaintiffs and the Defendants consenting to entry of the proposed
Final Judgment after compliance with the requirements of the Tunney
Act, 15 U.S.C. 16. Pursuant to those requirements, the United States
also filed its Competitive Impact Statement (``CIS'') with the Court
on March 27, 2012; published the proposed Final Judgment and CIS in
the Federal Register on April 4, 2012, see 77 FR 20419; and had
summaries of the terms of the proposed Final Judgment and CIS,
together with directions for the submission of written comments
relating to the proposed Final Judgment, published in The Washington
Post on May 5, 7, 8, 9, 10, 11, and 12 of 2012. The sixty-day period
for public comment ended on July 9, 2012. The United States received
one comment, as described below and attached hereto.
II. The Investigation and the Proposed Resolution
The proposed Final Judgment is the culmination of an
investigation by the Antitrust Division of the United States
Department of Justice (``Department'') of the Agreement between
defendants described above. As part of its investigation, the
Department issued seven Civil Investigative Demands and conducted
more than fifty-three interviews of health-insurance competitors,
brokers, customers, and other individuals with knowledge of the
health-insurance industry. The Department carefully analyzed the
information obtained and thoroughly considered all of the issues
presented.
The Department found that, in each relevant geographic market,
the proposed acquisition would have eliminated substantial head-to-
head competition between Humana and Arcadian in the provision of
Medicare Advantage plans. This competition significantly benefited
thousands of seniors. If Defendants had completed the proposed
transaction as structured, the loss of competition likely would have
resulted in higher premiums and reduced benefits for seniors
enrolled in Medicare Advantage plans in the relevant geographic
markets.
After reviewing the investigative materials, the Department
determined that the proposed transaction violated Section 7 of the
Clayton Act, 15. U.S.C. 18. The proposed Final Judgment will
eliminate the anticompetitive effects identified in the Complaint by
requiring the Defendants to divest Arcadian's individual Medicare
Advantage business in 34 of the 45 relevant geographic markets, and
Humana's individual Medicare Advantage business in 11 of them
(collectively ``the Divestiture Assets'') to one or more acquirers
approved by, and on terms acceptable to, the United States.
Specifically, the divestitures will eliminate the anticompetitive
effects alleged in the Complaint by requiring the Defendants to
divest one or more Medicare Advantage plans in each relevant
geographic market to an acquirer that will compete vigorously with
the merged Humana-Arcadian. The divestitures are designed to allow
the acquirers of the assets to offer uninterrupted care to members
of Arcadian's and Humana's divested Medicare Advantage plans.
The Divestiture Assets include all of Arcadian's and Humana's
rights and obligations under the relevant Arcadian or Humana
contracts with the Center for
[[Page 56675]]
Medicare and Medicaid Services (``CMS''). The lines of business to
be divested cover approximately 12,700 individual Medicare Advantage
beneficiaries.
The Defendants must satisfy the United States that a viable
competitor will replace Arcadian's competitive presence in the sale
of individual Medicare Advantage plans in each of the forty-five
relevant geographic markets identified in the Complaint. The
divestitures must be (1) made to an acquirer that has the intent and
capability--including the necessary managerial, operational,
technical, and financial capability--to compete effectively in the
sale of Medicare Advantage products in the market, or markets, in
question, and (2) accomplished so as to satisfy the United States
that none of the terms of any agreement between Humana and any
acquirer gives Humana the ability to interfere with the acquirer's
ability to compete effectively. The proposed Final Judgment also
provides that the divestiture of the Divestiture Assets may be made
to one or more acquirers, provided that in each instance the United
States is satisfied that the Divestiture Assets will remain viable
and the divestitures will remedy the anticompetitive harm alleged in
the Complaint.
Humana completed its acquisition of Arcadian on March 31, 2012.
Since then, Humana has notified the United States of three proposed
divestitures: (1) HealthSpring Life and Health Insurance Company,
Inc., with respect to the Longview-Marshall, Amarillo, and Texarkana
Plans; (2) Vantage Health Plan Inc., with respect to the Shreveport
and Lake Charles Plans; and (3) WellCare of Texas, Inc., with
respect to the Arizona Plans. The United States reviewed and
approved the acquirer of each noticed divestiture upon concluding
that each acquirer would be a long-term, viable competitor capable
of preserving competition in the relevant markets that would
otherwise have been lost as a result of the merger.
III. Standard of Judicial Review
The Clayton Act, as amended by the APPA, requires that proposed
consent judgments in antitrust cases brought by the United States be
subject to a sixty-day comment period, after which the court shall
determine whether entry of the proposed Final Judgment ``is in the
public interest.'' 15 U.S.C. 16(e)(1). In making that determination,
the court, in accordance with the statute as amended in 2004, is
required to consider:
(A) The competitive impact of such judgment, including
termination of alleged violations, provisions for enforcement and
modification, duration of relief sought, anticipated effects of
alternative remedies actually considered, whether its terms are
ambiguous, and any other competitive considerations bearing upon the
adequacy of such judgment that the court deems necessary to a
determination of whether the consent judgment is in the public
interest; and
(B) The impact of entry of such judgment upon competition in the
relevant market or markets, upon the public generally and
individuals alleging specific injury from the violations set forth
in the complaint including consideration of the public benefit, if
any, to be derived from a determination of the issues at trial.
15 U.S.C. 16(e)(1)(A) & (B). In considering these statutory
factors, the court's inquiry is necessarily a limited one as the
government is entitled to ``broad discretion to settle with the
defendant within the reaches of the public interest.'' United States
v. Microsoft Corp., 56 F.3d 1448, 1461 (D.C. Cir. 1995); see also
United States v. SBC Commc'ns, Inc., 489 F. Supp. 2d 1 (D.D.C. 2007)
(assessing public-interest standard under the Tunney Act); United
States v. InBev N.V./S.A., 2009-2 Trade Cas. (CCH) ] 76,736, 2009
U.S. Dist. LEXIS 84787, No. 08-1965 (JR), at *3 (D.D.C. Aug. 11,
2009) (noting that the court's review of a consent judgment is
limited and only inquires ``into whether the government's
determination that the proposed remedies will cure the antitrust
violations alleged in the complaint was reasonable, and whether the
mechanisms to enforce the final judgment are clear and
manageable.'').
Under the APPA, a court considers, among other things, the
relationship between the remedy secured and the specific allegations
set forth in the United States' complaint, whether the decree is
sufficiently clear, whether enforcement mechanisms are sufficient,
and whether the decree may positively harm third parties. See
Microsoft, 56 F.3d at 1458-62. With respect to the adequacy of the
relief secured by the decree, a court may not ``engage in an
unrestricted evaluation of what relief would best serve the
public.'' United States v. BNS, Inc., 858 F.2d 456, 462 (9th Cir.
1988) (citing United States v. Bechtel Corp., 648 F.2d 660, 666 (9th
Cir. 1981)); see also Microsoft, 56 F.3d at 1460-62; InBev, 2009
U.S. Dist. LEXIS 84787, at *3; United States v. Alcoa, Inc., 152 F.
Supp. 2d 37, 40 (D.D.C. 2001). Courts have held that:
[t]he balancing of competing social and political interests
affected by a proposed antitrust consent decree must be left, in the
first instance, to the discretion of the Attorney General. The
court's role in protecting the public interest is one of insuring
that the government has not breached its duty to the public in
consenting to the decree. The court is required to determine not
whether a particular decree is the one that will best serve society,
but whether the settlement is ``within the reaches of the public
interest.'' More elaborate requirements might undermine the
effectiveness of antitrust enforcement by consent decree.
Bechtel, 648 F.2d at 666 (emphasis added) (citations
omitted).\1\ In determining whether a proposed settlement is in the
public interest, a district court ``must accord deference to the
government's predictions about the efficacy of its remedies, and may
not require that the remedies perfectly match the alleged
violations.'' SBC Commc'ns, 489 F. Supp. 2d at 17; see also
Microsoft, 56 F.3d at 1461 (noting the need for courts to be
``deferential to the government's predictions as to the effect of
the proposed remedies''); United States v. Archer-Daniels-Midland
Co., 272 F. Supp. 2d 1, 6 (D.D.C. 2003) (noting that the court
should grant due respect to the United States' ``prediction as to
the effect of proposed remedies, its perception of the market
structure, and its views of the nature of the case'').
---------------------------------------------------------------------------
\1\ Cf BNS, 858 F.2d at 464 (holding that the court's ``ultimate
authority under the [APPA] is limited to approving or disapproving
the consent decree''); United States v. Gillette Co., 406 F. Supp.
713, 716 (D. Mass. 1975) (noting that, in this way, the court is
constrained to ``look at the overall picture not hypercritically,
nor with a microscope, but with an artist's reducing glass''); see
generally Microsoft, 56 F.3d at 1461 (discussing whether ``the
remedies [obtained in the decree are] so inconsonant with the
allegations charged as to fall outside of the `reaches of the public
interest' '').
---------------------------------------------------------------------------
Courts have greater flexibility in approving proposed consent
decrees than in crafting their own decrees following a finding of
liability in a litigated matter. ``[A] proposed decree must be
approved even if it falls short of the remedy the court would impose
on its own, as long as it falls within the range of acceptability or
is `within the reaches of public interest'.'' United States v. Am.
Tel. & Tel. Co., 552 F. Supp. 131, 151 (D.D.C. 1982) (citations
omitted) (quoting United States v. Gillette Co., 406 F. Supp. 713,
716 (D. Mass. 1975)), aff'd sub nom. Maryland v. United States, 460
U.S. 1001 (1983); see also United States v. Alcan Aluminum Ltd., 605
F. Supp. 619, 622 (W.D. Ky. 1985) (approving the consent decree even
though the court would have imposed a greater remedy). To meet this
standard, the United States ``need only provide a factual basis for
concluding that the settlements are reasonably adequate remedies for
the alleged harms.'' SBC Commc'ns, 489 F. Supp. 2d at 17.
Moreover, the court's role under the APPA is limited to
reviewing the remedy in relationship to the violations that the
United States has alleged in its complaint, and does not authorize
the court to ``construct [its] own hypothetical case and then
evaluate the decree against that case.'' Microsoft, 56 F.3d at 1459;
see also InBev, 2009 U.S. Dist. LEXIS 84787, at *20 (``the `public
interest' is not to be measured by comparing the violations alleged
in the complaint against those the court believes could have, or
even should have, been alleged''). Because the ``court's authority
to review the decree depends entirely on the government's exercising
its prosecutorial discretion by bringing a case in the first
place,'' it follows that ``the court is only authorized to review
the decree itself,'' and not to ``effectively redraft the
complaint'' to inquire into other matters that the United States did
not pursue. Microsoft, 56 F.3d at 1459-60. As the United States
District Court for the District of Columbia confirmed in SBC
Communications, courts ``cannot look beyond the complaint in making
the public interest determination unless the complaint is drafted so
narrowly as to make a mockery of judicial power.'' SBC Commc'ns, 489
F. Supp. 2d at 15.
In its 2004 amendments to the Tunney Act,\2\ Congress made clear
its intent to
[[Page 56676]]
preserve the practical benefits of using consent decrees in
antitrust enforcement, adding the unambiguous instruction that
[n]othing in this section shall be construed to require the court to
conduct an evidentiary hearing or to require the court to permit
anyone to intervene.'' 15 U.S.C. 16(e)(2). This language effectuates
what Congress intended when it enacted the Tunney Act in 1974. As
Senator Tunney explained: ``[t]he court is nowhere compelled to go
to trial or to engage in extended proceedings which might have the
effect of vitiating the benefits of prompt and less costly
settlement through the consent decree process.'' 119 Cong. Rec.
24,598 (1973) (statement of Senator Tunney). Rather, the procedure
for the public-interest determination is left to the discretion of
the court, with the recognition that the court's ``scope of review
remains sharply proscribed by precedent and the nature of Tunney Act
proceedings.'' SBC Commc'ns, 489 F. Supp. 2d at 11.\3\
---------------------------------------------------------------------------
\2\ The 2004 amendments substituted ``shall'' for ``may'' in
directing relevant factors for courts to consider and amended the
list of factors to focus on competitive considerations and to
address potentially ambiguous judgment terms. Compare 15 U.S.C.
16(e) (2004), with 15 U.S.C. 16(e)(1) (2006); see also SBC Commc'ns,
489 F. Supp. 2d at 11 (concluding that the 2004 amendments
``effected minimal changes'' to Tunney Act review).
\3\ See United States v. Enova Corp., 107 F. Supp. 2d 10, 17
(D.D.C. 2000) (noting that the ``Tunney Act expressly allows the
court to make its public interest determination on the basis of the
competitive impact statement and response to comments alone'');
United States v. Mid-Am. Dairymen, Inc., 1977-1 Trade Cas. (CCH) ]
61,508, at 71,980 (W.D. Mo. 1977) (``Absent a showing of corrupt
failure of the government to discharge its duty, the Court, in
making its public interest finding, should * * * carefully consider
the explanations of the government in the competitive impact
statement and its responses to comments in order to determine
whether those explanations are reasonable under the
circumstances.''); S. Rep. No. 93-298 at 6 (1973) (``Where the
public interest can be meaningfully evaluated simply on the basis of
briefs and oral arguments, that is the approach that should be
utilized.'').
---------------------------------------------------------------------------
IV. Summary of Public Comment and the United States' Response
During the sixty-day comment period, the United States received
only one comment, submitted by the American Medical Association
(``AMA''), which is attached to this Response. In its June 4, 2012
comment, the AMA expressed its support for the United States'
analysis as well as the remedy articulated in the proposed Final
Judgment, stating that the action against the defendants
``address[es] the important issue of health insurer consolidation.''
AMA Comment at 1. The United States has carefully reviewed the
comment and has determined that the proposed Final Judgment remains
in the public interest.
The AMA is the largest association of physicians and medical
students in the United States. The AMA's comment states that:
MA [Medicare Advantage] plans in competitive markets have
incentives to submit lower premium bids to the Centers for Medicare
and Medicaid Services (CMS), have more robust physician networks,
and seek high patient satisfaction and quality in order to retain
members. In contrast, less competition between MA plans may decrease
the plans' incentives to maintain seniors' access to health care
providers and minimize out-of-pocket costs.
Id. The comment concludes that ``[t]he AMA supports the DOJ's
proposed final judgment regarding the acquisition of Arcadian by
Humana and the DOJ's continued work to ensure that competition among
insurers is sufficient to protect consumers.'' Id.
V. Conclusion
After reviewing the AMA's public comment, the United States
continues to believe that the proposed Final Judgment, as drafted,
provides an effective and appropriate remedy for the antitrust
violations alleged in the Complaint, and is therefore in the public
interest. The United States will move this Court to enter the
proposed Final Judgment after the AMA's comment and this response
are published in the Federal Register.
Dated this 5th day of September 2012.
Respectfully submitted,
/s/ Adam Gitlin
Adam Gitlin
Barry Creech (DC Bar 421070)
Barry Joyce
Edward D. Eliasberg, Jr. (DC Bar 199182)
Katrina Rouse
Attorneys for the United States
Litigation I Section
Antitrust Division
U.S. Department of Justice
450 Fifth Street, NW., Suite 4100
Washington, DC 20530
Telephone: (202) 307-6456
Facsimile: (202) 305-1190
Email: [email protected]
June 4, 2012
Joshua H. Soven
Chief, Litigation I Section
Antitrust Division
U.S. Department of Justice
450 Fifth Street NW.
Suite 4100
Washington, DC 20530
Re: United States v. Humana Inc. and Arcadian Management Services,
Inc.; Proposed Final Judgment and Competitive Impact Statement
(1:12-cv-00464)
Dear Mr. Soven: On behalf of the physician and medical student
members of the American Medical Association (AMA), I write in regard
to the complaint and proposed final judgment filed by the Department
of Justice (DOJ) regarding the acquisition of Arcadian Management
Services, Inc. (``Arcadian'') by Humana Inc. (``Humana''). The AMA
files these comments pursuant to the Antitrust Procedures and
Penalties Act, 15 U.S.C. 16(b-e) (the ``Tunney Act''), because the
DOJ' s complaint and proposed final judgment address the important
issue of health insurer consolidation. The consolidation of health
insurance markets seriously impedes the proper functioning of health
care markets overall, and oftentimes results in less care for
patients, higher premiums, and interference with patient-physician
relationships. The AMA supports the DOJ's careful review of health
insurer mergers and the DOJ's proposed final judgment on the
acquisition of Arcadian by Humana.
The DOJ's complaint asserts that the transaction would end the
substantial ``head-to-head'' competition between Humana and Arcadian
Medicare Advantage (MA) plans and impair competition in 45 counties
located in Arizona, Arkansas, Louisiana, Oklahoma, and Texas.
According to the DOJ's estimate, the acquisition would give Humana
market shares ranging from 40 percent to 100 percent with respect to
MA plans. These high market shares create a significant risk that
the acquisition, if allowed to proceed unaltered, would give Humana
anti-competitive market power in those 45 counties. MA plans in
competitive markets have incentives to submit lower premium bids to
the Centers for Medicare and Medicaid Services (CMS), have more
robust physician networks, and seek high patient satisfaction and
quality in order to retain members. In contrast, less competition
between MA plans may decrease the plans' incentives to maintain
seniors' access to health care providers and minimize out-of-pocket
costs.
The AMA supports the DOJ's proposed final judgment regarding the
acquisition of Arcadian by Humana and the DOJ's continued work to
ensure that competition among insurers is sufficient to protect
consumers.
Sincerely,
/s/ James L. Madara, MD
[FR Doc. 2012-22389 Filed 9-12-12; 8:45 am]
BILLING CODE M