Missouri’s insurance regulator could block Aetna and Humana from offering certain insurance plans in the state if they go forward with a $37 billion dollar merger announced last year.

In a letter posted on the state's Department of Insurance website Tuesday, Director John Huff said the Aetna-Humana deal would be anti-competitive. He has ordered the companies to stop selling four types of insurance plans in the state if it goes through, including Medicare Advantage.

Missouri is the first state to signal disapproval of the pending merger, which would combine two of the largest health insurers in the country. An state analysis determined the combined company would control too much of the market for the four types of health plans. It gave the insurers 30 days to propose changes. 

“One state’s decision alone is unlikely to make Aetna and Humana abandon the deal. The question is whether this is the tip of the iceberg,” said Martin Gaynor, a professor at Carnegie Mellon University and a former consultant to the Federal Trade Commission.

"If enough states, or enough big important states, nix the deal, then it becomes a question whether the deal is still worthwhile for Aetna and Humana," Gaynor said.

Supporters say the decision is a win for consumers—greater competition can keep insurance rates down. The U.S. Department of Justice’s Antitrust Division will likely have the final say on a national level.

Aetna has argued the deal will lower costs and improve quality.

“While we’re disappointed with the Missouri order, we expect to have a constructive dialogue with the state to address their concerns,” Aetna spokesperson Rohan Hutchings said in a statement.

Generally, merging companies can remedy antitrust issues by selling some assets off to a third party, known as divestitures.

But that’s much harder when it comes to health insurance, said Duke University law professor Barak Richman.

“You’re selling off contracts, networks of providers, communities of patients that expect a continuity of care. It’s very, very hard to sell those to a third party that would really be able to use them effectively and create a meaningful counterweight,” Richman said.

In Missouri, the cease and desist order would apply to four types of plans:

• Comprehensive individual plans
• Comprehensive small group plans
• Group Medicare Advantage Plans statewide
• Individual Medicare Advantage Plans in 65 counties

Sidney Watson, who tracks health insurance rates in Missouri for St. Louis Universitiy, applauded the decision. But she  sees a worrisome trend of mergers and consolidations throughout the industry.  

“What makes private insurance work is vigorous and rigorous competition among health insurers,” she said. “The market share they have are pretty dramatic.”

Follow Durrie on Twitter: @durrieB. 

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