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AP file photo

A federal judge has ruled against the proposed merger of Aetna and Humana, arguing the deal is "likely to substantially lessen competition" in health insurance markets nationwide.

The decision in favor of the Department of Justice by Judge John Bates surprised many financial analysts, who were confident the deal would get approval since Aetna agreed to sell some of its business to another insurer, Molina Healthcare. But the ruling is a major win for consumer groups, economists and antitrust officials, as well as hospitals and doctors, who feared the deal would raise health insurance premiums.

An Aetna spokesman said the company is "reviewing the opinion now and giving serious consideration to an appeal after putting forward a compelling case."

Why Aetna and Humana lost: The biggest reason is Medicare Advantage. Aetna and Humana are major players in the private alternative to traditional Medicare. Their merger would have created the largest Medicare Advantage company and would have heavily consolidated the market, giving those beneficiaries fewer options.

Market definition: Aetna and Humana argued the scope should be broadened — that they compete with the government's traditional Medicare as well as other Medicare Advantage plans. Aetna hired economists to hammer home that point. But the judge didn't buy that argument, saying the two markets most often operate in their own bubbles.

The judge's money quote: "This evidence tends to show that substitution between Medicare Advantage and original Medicare options is not nearly as substantial as defendants now suggest."

Obamacare exchanges played a role, too: Aetna and Humana said there shouldn't be any worries about their individual market plans either since there isn't any overlap. But the judge wasn't buying it. Aetna bailed on many Obamacare markets for 2017, but the judge said that withdrawals were politically motivated to help Aetna's case in the lawsuit — and Aetna could re-enter the exchanges in the future if it wanted.

"Because Aetna's withdrawal from the public exchanges in the 17 complaint counties was to avoid antitrust scrutiny, the court gives that evidence little weight in predicting whether Aetna will continue to compete on the exchanges in the future," the judge wrote. David Anderson, a health policy analyst at Duke University, pointed out this ploy out last August when Aetna dropped its profitable Obamacare plans in Pennsylvania.

What does this mean for Anthem-Cigna? If the courts found Aetna-Humana to violate antitrust guidelines, the Anthem-Cigna deal almost certainly will face the same fate. Reports circulated last week that Anthem-Cigna was dead. And that merger faced many more antitrust hurdles related to health insurance offered by large employers.

Go deeper

Updated 2 hours ago - World

In photos: Israel-Hamas aerial bombardments enter second week

A ball of fire and a plume of smoke rise above buildings in Gaza City as Israeli forces shell the Palestinian enclave, early on May 17. Photo: Mahmud Hams/AFP via Getty Images

Israel and Hamas continued aerial bombardments into Monday morning, as fighting entered a second week.

Why it matters: The worst violence in the region since 2014 has resulted in the deaths of 197 people in Gaza, ruled by Hamas, and 10 in Israel. 58 Palestinian children and two Israeli children are among those killed since the aerial exchanges began on May 10, Reuters notes.

Lawmakers call for Israel-Hamas ceasefire amid aerial bombardments

Combination images of Republican Sen. Todd Young and Democratic Sen. Chris Murphy. Photo: Michael Reynolds-Pool/Getty Images/Greg Nash-Pool/Getty Images

Sen. Todd Young (R-Ind.) and 28 Senate Democrats on Sunday called for a ceasefire between Israel and Hamas as fighting continued into the night.

Driving the news: Young, a ranking member of the U.S. Senate Foreign Relations Subcommittee on Near East, South Asia, Central Asia and Counterterrorism, joined panel Chair Chris Murphy (D-Conn.) in a bipartisan statement saying: "Israel has the right to defend itself from Hamas' rocket attacks, in a manner proportionate with the threat its citizens are facing.

Bill Gates faces scrutiny over relationship with Microsoft employee, Epstein ties

Photo: Alessandro Di Ciommo/NurPhoto via Getty Images

Representatives for Bill Gates pushed back on claims Sunday that he left Microsoft's board because of an earlier sexual relationship and against two other reports detailing more extensive ties with Jeffrey Epstein than had previously been reported.

Driving the news: Microsoft said in an emailed statement to Axios that it "received a concern" in 2019 that its co-founder "sought to initiate an intimate relationship with a company employee in the year 2000," but denied a Wall Street Journal report that its board members thought Gates should resign over the matter.