US moves to block health insurer deals led by Anthem, Aetna
NEW YORK: US antitrust officials moved to block an unprecedented consolidation of the national health insurance market, filing suit against Anthem Inc’s proposed purchase of Cigna Corp and Aetna Inc’s planned acquisition of Humana Inc.
The US Department of Justice said the two multibillion dollar mergers would reduce competition, raise prices for consumers and stifle innovation if the number of large, national insurers were to fall from five to three.
It was the latest example of the Obama administration challenging massive combinations in major industries, from oilfield services to telecommunications.
“We will not hesitate to intervene. We will not shy away from complex cases,” US Attorney General Loretta Lynch told a news conference on Thursday. “We will protect the people.”
The deals would hurt consumers in the different markets served by the four companies, from medical coverage provided by large corporations to their interests of the American employees to Medicare Advantage plans for the elderly and insurance sold to individuals on exchanges created under President Barack Obama’s healthcare reform law, the Justice Department said.
“We have no doubt that these mergers would reduce competition from what it is today,” said Principal Deputy Associate Attorney General William Baer, who spearheaded the antitrust reviews.
Aetna and Anthem had each argued that their proposed purchases would help lower prices for consumers, by giving them greater leverage in negotiating with doctors and hospitals.
Aetna and Humana said on Thursday they plan “to vigorously defend the companies’ pending merger,” which is worth $33 billion.
Aetna Chief Executive Mark Bertolini said the company has proposed divesting enough assets to ensure competition in markets where it overlaps with Humana.
“If we can’t come to a negotiation on what markets to divest, although we have two very complete remedies in front of the Department of Justice now, I think I’m willing to let a judge decide,” Bertolini told business news channel CNBC. “We’ll go all the way we need to make this happen.”
Anthem had a more muted response, saying it was committed to working towards a settlement with the Justice Department for its $45 billion transaction. Cigna said it was evaluating its options. It does not believe a deal would close before 2017, “if at all.”
Shares in Humana rose nearly 9 per cent. After news of the lawsuit, Humana raised its 2016 earnings forecast on Thursday, saying its core businesses, Medicare Advantage and Healthcare Services, are doing better than expected.
Cigna shares rose more than 4 per cent, while Aetna and Anthem were up about 2 per cent. Speculation that the US would block both deals have weighed on shares of all four insurers for several weeks.
In the suit against Aetna, the Justice Department cited specific concerns about damage to 1.6 million people in 364 counties who are customers of Medicare Advantage, the program that serves older people.
It also said there were issues for the individual plans sold on Obamacare exchanges, where the government has sought to spur competition and keep prices low.
About 20 state insurance departments were required to review the Aetna-Humana deal. One state, Missouri, came out firmly against it, while others, including California and New York, approved it after reaching a settlement.