DOJ suing to block Anthem-Cigna, Aetna-Humana mergers

Antitrust lawsuits have been filed by the U.S. Department of Justice (DOJ) in an effort to block Anthem’s $48 billion acquisition of Cigna and Aetna’s $37 takeover of Humana.

U.S. Attorney General Loretta Lynch said the mergers would concentrate too much of the insurance market in too few companies, while doubting promises from the merging insurers that savings from efficiencies would be passed onto consumers.

“If allowed to proceed, these mergers would fundamentally re-shape the health insurance industry,” Lynch said. “It leave much of the multi-trillion health insurance industry in the hands of just three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of American rely on to receive health care.”

Bill Baer, the assistant attorney general for DOJ’s Antitrust Division, said in both cases, the companies are “thriving as independent firms” and don’t need to merge to survive. When judging the Anthem-Cigna deal separately, Baer said the proposed acquisition would affect competition on both price and quality since the two current rivals would no longer be one-upping each other to include more physicians and hospitals within their networks.

“Anthem claims that consumers will benefit if it becomes the 800-pound gorilla at the bargaining table, forcing cost concessions from doctors and hospitals without regard to the impact those concessions would have on the quality of medical care,” Baer said. “The antitrust laws don’t work that way. You don’t get to buy a competitor, eliminate substantial completion, just to increase your bargaining leverage with healthcare providers.”

On the Aetna-Humana merger, Baer specifically mentioned the antitrust concerns raised by the share of Medicare Advantage (MA) business it would control. Aetna has reportedly been looking for sell off $1 billion worth of its MA holdings, but Baer said the divestiture the companies have proposed wouldn’t be enough for the DOJ to drop its lawsuit.

“The buyers of these packages would have to rely on Aetna and on Anthem for ongoing services for years and years,” Baer said. “The standard we apply is will the status quo be preserved? Will consumers, after a divestiture, benefit from the same degree of competition that exists today? We have zero confidence that the proposals that have been made to us come close to meeting that standard.”

The DOJ’s lawsuits are exactly what several groups of politicians and state regulators have requested over the past several months:

• On May 24, Missouri’s insurance department issued an order against the Aetna-Humana merger over its “anticompetitive impact."
• On June 16, California Insurance Commissioner Dave Jones asked the DOJ to block the Anthem-Cigna deal, saying “More competition in California's consolidated health insurance markets is needed, not less.”
• On June 22, seven Democratic U.S. Senators wrote a letter to the DOJ asking it to challenge the deals, arguing the result will be higher premiums and reduced access to care.

Not all state agencies have opposed the deals—18 state insurance regulators signed off on the Aetna-Humana deal, and another 10 approved the Anthem-Cigna merger. Aetna cited the approval of state regulators in its response to the lawsuit, arguing the proposed acquisition of Humana would help, not hurt, seniors who participate in Medicare Advantage.

“A combined company will result in a broader choice of products, access to higher quality and more affordable care, and a better overall experience for consumers. Aetna and Humana look forward to making this clear in court, where a judge will review the transaction based on its merits,” Aetna said.

Anthem made similar comments in defending its proposed merger, calling the lawsuit “a misguided step backwards” in improving access to care. Unlike Aetna, however, Anthem said a settlement would be considered in order for the acquisition of Cigna to move forward.  

“Anthem is fully committed to challenging the DOJ’s decision in court but will remain receptive to any efforts to reach a settlement with the DOJ that will allow us to complete the transaction, Anthem said.

The DOJ is joined in the lawsuit by nine states and the District of Columbia. Lynch said the lawsuits were filed before the same judge, but since different markets are involved, the cases are likely to be tried separately.