The U.S. Department of Justice (DOJ) is suing to block two mega-mergers between four of the largest health insurers in the nation, claiming the alignments will harm competition and reduce patient choice.
The DOJ and a number of state attorneys general filed legal challenges July 21 in the U.S. District Court for the District of Columbia seeking to ban Anthem’s proposed acquisition of Cigna and Aetna’s proposed acquisition of Humana. The lawsuits allege the two mergers – valued at $54 billion and $37 billion respectively – would negatively affect doctors, patients, and employers, by limiting price competition, reducing benefits, decreasing incentives to provide innovative wellness programs, and lowering quality of care.
Courtesy U.S. Department of Justice
U.S. Attorney General Loretta E. Lynch
“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,” U.S. Attorney General Loretta E. Lynch said in a statement. “Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better health care for all Americans.”
Anthem called the lawsuit “an unfortunate and misguided step backward for access to affordable health care.
“The DOJ’s action is based on a flawed analysis and misunderstanding of the dynamic, competitive, and highly regulated health care landscape and is inconsistent with the way that the DOJ has reviewed past health care transactions,” Anthem officials said in a statement. “Anthem has an unwavering commitment to enhancing access to affordable health care, and the benefits and efficiencies from its merger with Cigna is one way that Anthem will continue its mission of improving consumer choice, quality, and affordability.”
In a statement, Cigna officials said that company is evaluating its options given the nature of the concerns raised by the DOJ. Aetna and Humana meanwhile, vowed to vigorously defend their pending merger.
“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,” according to a joint statement. “Aetna and Humana look forward to making this clear in court, where a judge will review the transaction based on its merits.”
Anthem’s proposed acquisition of Cigna would be the largest merger in the history of the health insurance industry, according to the DOJ. The companies began talks of a possible merger in early 2014 and Anthem agreed to acquire Cigna for $54 billion in 2015, according to court documents.
Meanwhile, Aetna began inquiring about a deal with Humana in March 2015, entering into a definitive agreement to acquire Humana for $37 billion later that year. The two proposed mergers have been closely watched by the DOJ and other regulatory agencies from the start.
The DOJ’s suit against Anthem and Cigna alleges the merger would substantially reduce competition for millions of patients who receive commercial health insurance coverage, from large-group employers in at least 35 metropolitan areas and from public exchanges created by the Affordable Care Act. The elimination of Cigna also threatens competition among commercial insurers for the purchase of health care services from hospitals, physicians, and other providers, the suit alleges. Eleven states and the District of Columbia joined the department’s challenge of the Cigna acquisition.
The government’s challenge against Aetna and Humana alleges the merger would greatly reduce Medicare Advantage competition in more than 350 counties in 21 states, affecting more than 1.5 million Medicare Advantage patients. The lawsuit also claims 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. Eight states and the District of Columbia joined the department’s challenge of the Humana acquisition.
The American Medical Association voiced support for the lawsuit, condemning the proposed transactions as moves that will lessen competition and choice. In 2015, AMA issued special analyses showing that the combined impact of the proposed Anthem/Cigna and Aetna/Humana mergers and urged the federal government to block the transactions.
Dr. Andrew W. Gurman
“The prospect of reducing five national health insurance carriers to just three is unacceptable,” AMA President Andrew W. Gurman, MD, said in a statement. “[The] action by the DOJ acknowledges the AMA’s concern that patients’ interests can be harmed when big insurers acquire rivals and develop strangleholds on local markets. Allowing commercial health insurers to become too big and exert control over the delivery of health care would be bad for patients and vitality of the nation’s health care system.”