Amid speculation about the outcome, The Department of Justice (DOJ), joined by a number of states, filed complaints on July 21 in federal district court challenging the mergers of health insurance giants Anthem and Cigna and Aetna and Humana. Attorney General Loretta Lynch announced the filing and noted that these deals would eliminate competition at the expense of consumers, employers and healthcare providers.
Another top DOJ official said, “If allowed to proceed, these mergers also would cut off innovation and competition American consumers otherwise would enjoy in the future . . . the mergers would increase premiums, decrease benefits and slow innovation. These companies are thriving independently and don’t need these to survive.” (See the prepared remarks here.
These mergers may be a convenient shortcut to increased profits for those companies, “but the antitrust laws make clear that mergers are not lawful when they risk denying consumers the benefits of competition, said one of the department’s top antitrust officials.” (“Insurers will consolidate even if mega-mergers fail,” Modern Healthcare, July 23, 2016)
Eleven states—California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia—and the District of Columbia joined DOJ’s challenge of Anthem’s $54 billion acquisition of Cigna. Eight states—Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia—and the District of Columbia joined the challenge of Aetna’s $37 billion acquisition of Humana, DOJ said in a press release. (“DOJ Sues to Block Health Insurance Mergers,” AHLA Weekly, July 22, 2016)
Stifling Competition
The DOJ official noted that “Anthem’s effort to buy Cigna affects both price competition and quality competition” and rejected claims that consumers would benefit from a combined Anthem-Cigna through additional cost concessions from healthcare providers.
“Antitrust laws don’t work that way—you don’t get to buy a competitor, and eliminate substantial competition, just to increase bargaining leverage with healthcare providers,” the official said.
The Aetna-Humana combination would eliminate meaningful choices for seniors in certain Medicare Advantage markets, and in other areas benefits would be reduced and seniors would experience a hike in premiums, as well as fewer choices.
And both deals would dampen competition on the health insurance exchanges.
Response from Providers
The American Hospital Association (AHA) called DOJ’s action “good news for consumers.” The President and CEO of AHA noted that competition in the health insurance markets already is alarmingly low.
The American Medical Association’s president said that the federal government has a strong obligation to enforce antitrust laws that prohibit harmful mergers and foster a more competitive market place that will operate in the patients’ best interests.
Federal regulators did not agree that the deals “were necessary to extract better price discounts from hospitals and doctors.” Anthem, for instance, claimed “if it becomes the 800-pound gorilla at the bargaining table,” it could push back against the consolidating provider systems, hypothetically lowering premiums. (“Why the Justice Department rejected the Aetna and Anthem deals,” Modern Healthcare, July 25, 2016)
“Many people maintain” that the desire to grow larger results from the Affordable Care Act because it “encourages hospitals, doctors and insurers to create more cohesive systems of care.” (“Insurers will consolidate even if mega-mergers fail, Modern Healthcare, July 23, 2016)
iProtean, now part of Veralon subscribers, the advanced Mission & Strategy course Beyond Payment Changes: Disruptors of Our Health System, featuring Marian Jennings, Dan Grauman and Jim Rice, is in your library. Our experts discuss the disruptor/payment change link, changes driving disruption and preparing for demand destruction.
For a complete list of iProtean, now part of Veralon courses, click here.
For more information about iProtean, now part of Veralon, click here.