[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]


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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'').
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    \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' '').
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    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\
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    \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.'').
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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]
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