The DOJ on Thursday announced it will file lawsuits to block the Anthem-Cigna and Aetna-Humana health-insurer mergers, which largely represents anti-competitive behavior.
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These mergers would transform the health insurance market by turning its five biggest companies into three.
Antitrust regulators, though, fear that the combined companies might not be in the best interests of American consumers.
“Competition in our health insurance markets is crucial to keeping premiums down and the quality of care up, particularly when it comes to our seniors and other vulnerable populations, the individuals most affected by this proposed acquisition”, Florida Attorney General Pam Bondi said in a statement. The multi-billion dollar deal would basically recreate the health care industry, reducing the choices of health care providers from four large companies to just three.
“Our actions seek to preserve competition that keeps premiums down”, she added.
S&P on Friday also said Indianapolis-based Anthem Inc. and Bloomfield, Connecticut-based Cigna Corp., whose $54 billion merger was challenged by the Justice Department on Thursday as well, will both remain on negative watch, where they were placed June 2015.
Eleven states and the District of Colombia joined the DOJ suit against Anthem and Cigna; eight states and DC joined the suit against Aetna and Humana.
“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 now evaluating its options consistent with its obligations under the agreement”, Cigna said in a statement. They say the mergers will actually help to reduce health care costs and give the insurance companies greater leverage in negotiating prices with hospitals and doctors.
The suit against Anthem and Cigna alleges that their merger would substantially reduce competition for millions of consumers who receive commercial health insurance coverage from national employers throughout the United States. Cigna said, “We do not believe the transaction will close in 2016, and the earliest it could close is 2017, if at all”.
Humana’s significant outlook increase was helping fuel its shares, while “the strong wording from their press releases as far as their intention to fight the Justice Department in court over these lawsuits I think has encouraged a lot of investors”, said Morningstar analyst Vishnu Lekraj.
The lawsuits were filed in the U.S. District Court for the District of Columbia.
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The US moved Thursday to prevent huge mergers involving four of the top five health insurers, hoping to stall industry consolidation and protect the gains of President Barack Obama’s sweeping healthcare reforms.
