Payers, Policy

DOJ sues to block Anthem-Cigna and Aetna-Humana mergers (updated)

The companies disagreed, though some more strongly than others. All four have vowed to defend their planned mergers in court.

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The U.S. Department of Justice and numerous states made it official on Thursday, suing to block the proposed mergers between mega-health insurers Anthem and Cigna and between Aetna and Humana. Federal officials cited the fact that the deals would reduce the number of major, national, private payers from five to three.

“These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies,” Attorney General Loretta Lynch said in DOJ’s statement on the suits. “Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better healthcare for all Americans.”

According to DOJ, 11 states plus the District of Columbia joined the federal suit against the planned $54 billion Anthem-Cigna merger. Eight states plus D.C. signed onto the challenge of the $37 billion Aetna-Humana deal. Both cases were filed in U.S. District Court for D.C.

The statement explained:

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; from large-group employers in at least 35 metropolitan areas, including New York, Los Angeles, San Francisco, Denver and Indianapolis; and from public exchanges created by the Affordable Care Act in St. Louis and Denver. The complaint also alleges that the elimination of Cigna threatens competition among commercial insurers for the purchase of healthcare services from hospitals, physicians and other healthcare providers. The merger would eliminate substantial head-to-head competition in all these markets, and it would remove the independent competitive force of Cigna, which has been a leader in the industry’s transition to value-based care.

The lawsuit against Aetna and Humana alleges that their merger would substantially reduce Medicare Advantage competition in more than 350 counties in 21 states, affecting more than 1.5 million Medicare Advantage customers in those counties. Before seeking to acquire Humana, Aetna had pursued aggressive expansion in Medicare Advantage. Aetna, the nation’s fourth-largest Medicare Advantage insurer by membership, has nearly doubled its Medicare Advantage footprint over the past four years. Humana is the nation’s second-largest Medicare Advantage insurer by membership. The lawsuit also alleges that Aetna’s purchase of Humana would substantially reduce competition to sell commercial health insurance to individuals and families on the public exchanges in 17 counties in Florida, Georgia and Missouri, affecting more than 700,000 people in those counties. The lawsuit alleges that by buying Humana, Aetna would eliminate one of its strongest and most capable competitors in these markets.

Obviously, the companies disagreed, though some more strongly than others.

“Today’s action by the Department of Justice (DOJ) is an unfortunate and misguided step backwards for access to affordable healthcare for America. Access to health insurance saves lives, improves health and reduces the cost of care for all Americans.” Indianapolis-based Anthem said in a statement.

The insurer said DOJ sued “based on a flawed analysis and misunderstanding of the dynamic, competitive and highly regulated healthcare landscape” and vowed to challenge the suit in court.

Cigna was more diplomatic, saying it was “currently evaluating its options.” The company, headquartered in Hartford, Connecticut, added that the suit makes it all but impossible for the Anthem merger to close in 2016.

Aetna and Humana put out a joint statement saying they intend to “vigorously defend” their planned combination.

“A combined company is in the best interest of consumers, particularly seniors seeking affordable, high-quality Medicare Advantage (MA) plans,” those merger partners said. “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.”

Don’t judge this in isolation, though, one research firm said.

“It is important to note that both AET/HUM and ANTM/CI merger agreements require the buyer to litigate these cases upon regulatory block, so the quick press releases from AET and ANTM announcing intent to litigate aren’t necessarily indicative of the company’s conviction that they will win. In general, we believe companies have won or settled less than half of DOJ challenges,” said a J.P. Morgan research note.

Interestingly, all four companies saw their stock prices rise on the news of the DOJ suit.

Humana investors in particular had a good day, as the Louisville, Kentucky-based insurer’s shares gained more than 8 percent Thursday. Notably, Humana announced independently of the DOJ news that it was raising its earning guidance for the rest of the year after deciding to shed about two-thirds of its money-losing Affordable Care Act individual business in 2017.

Some of that growth also could be attributed to the fact that a Humana subsidiary was one of two insurance companies to win Department of Defense contracts to support the Pentagon’s Tricare healthcare program.

Photo: Stuart Heath (Creative Commons)