WASHINGTON (Legal Newsline) -- Humana Inc. and Arcadian Management Services Inc. will have to divest assets relating to Arcadian's Medicare Advantage business in parts of five states if Humana wants to proceed with its acquisition of Arcadian, the Department of Justice has ruled.

The DOJ is requiring divestitures of health plans in 51 counties and parishes in Arizona, Arkansas, Louisiana, Oklahoma and Texas. It claims that without this the deal would likely have resulted in higher prices, fewer choices and lower quality Medicare Advantage plans purchased by Medicare beneficiaries.

According to the March 27 announcement, the Antitrust Division filed a lawsuit in the U.S. District Court for Washington, D.C., to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the lawsuit and the department's competitive concerns.

The proposed settlement terms will have current enrollees of Humana and Arcadian's Medicare Advantage plans substantially continue with the same access to providers, including doctors, hospitals and other medical services, after the divestitures as before the divestitures were required.

It contains provisions ensuring buyers of the divested Medicare Advantage plans will have substantially all of the health care providers included in the Humana and Arcadian plans at substantially the same rates. The DOJ stressed the importance of these requirements stating that to compete effectively, a health insurer needs a network of health care providers at competitive rates.

"Protecting competition in health care has been and continues to be a top priority of the Antitrust Division," said Acting Assistant Attorney General Sharis A. Pozen in charge of the DOJ's Antitrust Division. "These divestitures preserve competition so that Medicare beneficiaries, primarily senior citizens, in Arizona, Arkansas, Louisiana, Oklahoma and Texas, benefit from lower prices, better quality services and more innovative products for their health care needs."

Those eligible for Medicare are given the choice of enrolling in a private Medicare Advantage plan instead of the government Medicare plan. Congress established the Medicare Advantage program so that market competition among private insurers would lead to a rich set of affordable benefits, more generous health-insurance choices, and more customer responsiveness.

According to DOJ, the original acquisition plans would have eliminated competition between Humana and Arcadian. The combined company would control between 40 and 100 percent of the Medicare Advantage health insurance market in the areas described by DOJ.

Humana Inc. is a Delaware corporation headquartered in Louisville, Ky. It reported revenues of approximately $33.6 billion in 2010.

Arcadian Management Services Inc. is a Delaware corporation headquartered in Oakland, Calif., with about 62,000 Medicare Advantage members in 15 states. Company revenues were $622 million in 2010.

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