Justice Department Moves To Block 2 Big Health Insurance Mergers
The Justice Department is suing to block two proposed mergers between major health insurance companies, saying the deals violate antitrust laws and would lead to higher health care costs for Americans.
U.S. Attorney General Loretta Lynch explained the decision at a press conference:
"If allowed to proceed, these mergers would fundamentally reshape the health insurance industry. They would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care.
"Among other consequences, the number of health insurance options available to nationwide employers would shrink from four to three. Two of the largest and fastest-growing providers of Medicare Advantage plans, which millions of seniors rely on for crucial medical coverage, would combine into just one. And competition would be substantially reduced for hundreds of thousands of families and individuals who buy insurance on the public exchanges established under the Affordable Care Act."
The lawsuits filed Thursday morning challenged a $37 billion merger between Humana and Aetna, which the Justice Department alleges "would lead to higher health-insurance prices, reduced benefits, less innovation, and worse service for over a million Americans," and a $54 billion acquisition of Cigna by Anthem, which the court filing states would be the largest merger in the history of the health insurance industry.
The two suits both list eight states and the District of Columbia as co-plaintiffs in the antitrust action. Those states are Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania and Virginia in the Aetna-Humana suit, and California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland and New Hampshire in the Anthem-Cigna suit.
The planned merger between Aetna and Humana was announced a year ago, and the companies were quick to react after news of the Justice Department suit. In a joint statement, Aetna and Humana said the companies intend to "vigorously defend the companies' pending merger in response to a U.S. Department of Justice lawsuit seeking to block the transaction. A combined company is in the best interest of consumers, particularly seniors seeking affordable, high-quality Medicare Advantage plans."
A statement by Cigna indicated the company had not yet decided how to proceed in light of the lawsuit:
"Given the nature of the concerns raised by the DOJ and the overall status of the regulatory process, which under the terms of the merger agreement was led by Anthem, Cigna is currently evaluating its options consistent with its obligations under the agreement."
The proposed Anthem-Cigna deal was also announced last summer. Both mergers being challenged are part of a wave of consolidation sweeping the health care industry, as NPR's Scott Hensley reported last year.
"One reason these health insurers are seeking to get bigger is that the hospitals and doctor groups across the negotiating table have also gotten bigger.
"There were 95 hospital mergers and acquisitions in 2014, according to management consulting firm Kaufman Hall. That's pretty much been the pace for the past few years. Deals that create larger health systems give the providers of health care more leverage in negotiating rates with private insurers."
If the health insurers decide to fight the lawsuits, Bloomberg reports that it would likely take months to resolve.
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