The U.S. Justice Department on Thursday sued to challenge two separate health insurance mergers, Anthem Inc.’s purchase of Cigna Corp. and Aetna Inc.’s acquisition of Humana Inc.
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According to the lawsuit, the merger would lead to “higher health insurance prices, reduced benefits, less innovation, and worse service for over a million Americans”.
Both Anthem and Aetna said they intend to fight the suits.
As The Palm Beach Post reported previous year, a merged Aetna and Humana “would give the combined entity over half of all Medicare Advantage enrollees in five Florida counties: Broward, Franklin, Palm Beach, Pasco, Volusia”, a coalition of consumer and labor groups including Consumers Union and Florida CHAIN warned.
Anthem has in the past argued its deal will reduce prices for consumers and boost innovative cooperation with health-care providers.
The filing to block the proposed $37 billion Aetna-Humana deal also mentions UnitedHealthcare’s pullback from the exchanges.
The four companies round out the Big Five health insurers nationally, with Minnetonka-based UnitedHealthcare the biggest of the bunch right now.
The Department of Justice cited concerns the merger could drive up health care costs and lower quality.
In the complaint, the states point to the benefit of competition between the two companies.
Anthem said the DOJ’s response was an “unfortunate and misguided step backwards for access to affordable healthcare for America”. Anthem and Cigna are two of the top five national health insurance carriers in the United States, and Anthem is the second largest carrier in New York State. It does not believe the transaction would close in 2016, and the earliest it would close would be in 2017, “if at all”.
Aetna and Humana responded Thursday by pledging to “vigorously” defend their merger plans.
One concern by USA regulators had regarding this deal was that there wouldn’t be enough robust competition in Medicare in more than 350 counties in 21 states, which could affect more than 1.5 million customers. Slatery said. “That is the question raised by the merger, whether one is a national employer comparing benefits and premiums, a health care provider like a hospital or physician practice, or an individual selecting a policy on an exchange”. Cigna would be in line to get $1.85 billion from Anthem, though the fee wouldn’t be owed if Cigna makes a “willful breach of its obligations to complete the mergers”.
“I don’t see Anthem, Cigna winning this case”.
The Justice Department has pushed aggressively in recent years to block deals in several industries that they say will reduce competition. Electrolux and Halliburton later abandoned those deals. Another analyst echoed that sentiment.
In April, then antitrust division chief Bill Baer said corporate leaders have shown too much “enthusiasm” for deals with “all that capital coming back into the marketplace”.
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. “Notably, many insurance departments across the country have approved these mergers”.
They said in a joint statement that their merger would not eliminate “robust competition” in Medicare related insurance. However, its individual insurance business remains “challenging”.
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Humana stock jumped 5.2 percent on the news.
