Justice Department may block health insurance mergers

By Deana Carpenter | Aug 4, 2016

WASHINGTON (Legal Newsline) – Competition between private insurance and Medicare Advantage programs is one impact from the potential mergers of major health insurance companies.

Recently, the U.S. Department of Justice filed suit to block the mergers of Aetna and Humana as well as Anthem Inc. and Cigna Corp.

“It is not surprising the Department of Justice and state attorneys general would seek to block these two acquisitions given the potential impact on competition for private insurance and Medicare Advantage products,” Kelly Hagemann, an attorney with Michelman and Robinson LLP of Los Angeles, told Legal Newsline.

She said many health care providers have expressed significant concern about consolidation of large health insurers.

According to the suit opposing the Cigna-Anthem merger, Anthem’s $54 billion acquisition of Cigna would be the largest merger in the history of the health insurance industry and would “substantially lessen competition, harming millions of American consumers as well as doctors and hospitals.”

In the Aetna/Humana suit, documents state Aetna’s $37 billion merger with Humana “would lead to higher health insurance prices, reduced benefits, less innovation and worse service for more than 1 million Americans.”

“The Department of Justice accepts consolidation in the industry generally, but has clearly taken the position that these two acquisitions would constitute too much consolidation," Haegmann said. "They would reduce the number of major insurers from five to three and would effectively eliminate direct competitors.” 

Three of the insurers said they would challenge the suit. Anthem said in a statement the Department of Justice’s actions are based on flawed analysis and misunderstanding of the health care industry. Cigna stated it was reviewing its options and evaluating the steps it would take next.

Hagemann said there’s no way to assess the outcome of the Department of Justice’s action.

“However, the Department of Justice has been successful in the past and has not undertaken its position lightly,” she said.

The Department of Justice is backed by several states as well as provider groups and consumer advocacy groups. There are also several advocate groups, apart from the insurers themselves, favoring the acquisitions, Hagemann said.

The states that have joined the Department of Justice’s challenge against Anthem acquiring Cigna include California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, Virginia and the District of Columbia.

Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania, Virginia and the District of Columbia have joined the suit challenging Aetna’s acquisition of Humana.

“The participation by several states will likely have a positive impact for the Department of Justice as the states are echoing the department’s concern that the mergers would result in higher premiums, reduced access to care and more provider dissatisfaction,” Hagemann said.

She said even Connecticut, where both Cigna and Aetna have headquarters, has joined the Department of Justice to challenge Anthem’s proposed acquisition of Cigna.

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