WASHINGTON, D.C.—The Obama administration announced Thursday that it will seek to block two mega health-care mergers, citing concerns that the deals could drive up health care premiums, undermine innovation and reduce competition.
The Justice Department filed lawsuits challenging Anthem’s $ 48 billion acquisition of Cigna and Aetna’s $ 37 billion acquisition of Humana, threatening to put an abrupt stop to the insurance industry’s rapid consolidation.
Eleven states and the District of Columbia joined the attempt to block the Anthem deal, which would combine the nation’s second and fourth largest insurers. Eight states and D.C. joined the suit to block the Aetna deal, which would combine the third and fifth largest.
Attorney General Loretta Lynch told reporters that the mergers would “drastically” curb competition in the insurance industry, including by reducing the number of options for people who buy insurance on public exchanges.
“If these mergers were to take place, the competition among these insurers that has pushed them to provide lower premiums, higher quality care and better benefits would be eliminated,” Lynch said.
In a showing of unity, Hartford, Conn.-based Aetna and Louisville-based Humana immediately issued a statement vowing to “vigorously” contest the government’s suit, saying their deal would improve quality of care and lower costs while increasing insurance options for many Medicare patients.
The Anthem-Cigna alliance appears to be on shakier ground. Hartford, Conn.-based Cigna said in a statement that the deal would no longer close in 2016 “and the earliest it could close is 2017, if at all,” adding that it is “currently evaluating its options.”
Indianapolis-based Anthem called the challenge an “unfortunate and misguided step backwards for access to affordable healthcare for America” and pledged to fight the suit in court, though it signaled an openness to a settlement, which could involve divestitures.
Marianne Udow-Phillips, director of the Center for Healthcare Research & Transformation at the University of Michigan, said that although the deals would likely reduce prices paid by health-care providers to insurers, patients wouldn't necessarily see a lower bill.
"That doesn't always get passed on to consumers," Udow-Phillips said in an interview, adding that “it will be challenging for them to succeed in court."
A federal judge will decide whether the mergers are anti-competitive — and although there is no guarantee the Justice Department will prevail, corporations often choose to give up instead of waging an uncertain, lengthy and costly fight against the government.
The American Hospital Association and the American Medical Association hailed the move as critical to preserving accessible health-care and fostering innovation among insurers.
“Fewer coverage options for consumers also would undermine the hospital field's goal of keeping communities vital and healthy through continuous innovation,” AHA CEO Rick Pollack said in a statement.
The suits mark the latest in a series of steps taken by the Justice Department’s anti-trust division to block corporate consolidation. The division prevented oilfield services giant Halliburton’s acquisition of Baker Hughes and blocked retail and supplies company Staples’ purchase of Office Depot.
Waging a fight against the insurance deals reflects another mark left by the Obama administration on the contours of an industry already dramatically reshaped by the president’s sweeping health care overhaul.
Udow-Phillips, director of the Center for Healthcare Research & Transformation, said there's a risk of less competition in the Obamacare exchanges if the deals are approved.
"More health plans are questioning whether they're going to stay in the exchange market and the government is very concerned because that individual market only works when there's enough competition," she said.
Principal Deputy Associate Attorney General Bill Baer, former antitrust chief, said the health care mergers are unnecessary.
“These insurance companies are already some of the largest, most sophisticated companies in the country,” he told reporters. “They are thriving as independent firms, they do not need these deals to survive and consumers deserve to benefit from their continued competition.”
Still, insurers have been aggressively pursuing consolidation sparked by the onset of Obamacare, which insurers have blamed for increasing regulatory costs.
If the deals collapse, the insurers “may take a break from mergers and acquisitions but will resume with smaller-scale transactions in the future,” S&P Global Healthcare analysts said Thursday in a research note.
The government said a merger of Anthem and Cigna would reduce head-to-head competition in at least 35 major metropolitan regions and give the combined company too much bargaining leverage over health care providers such as hospitals and doctors.
The Aetna-Humana deal would combine two of the four largest providers of Medicare Advantage plans, threatening to drive up costs for certain seniors, and would undermine competition in public exchanges in Florida, Georgia and Missouri, the government said.
A combination of the two companies would create the largest provider of Medicare Advantage plans, Udow-Phillips said.
Anthem and Cigna collectively serve 54 million people with combined 2015 revenue of more than $ 117 billion. Aetna and Human collectively serve 37 million people with $ 114 billion in revenue.
Follow USA TODAY reporter Nathan Bomey on Twitter @NathanBomey.
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