Justice Dept & 9 States Officially File To Block Anthem/Cigna, Aetna/Humana Mergers

Image courtesy of Anthem

The rumor mill yesterday has been borne out today, as the Department of Justice has officially filed a pair of lawsuits to block the mega-mergers of health insurers Anthem and Cigna.

In a press conference, U.S. Attorney General Loretta Lynch said, “We carefully considered the impact that these acquisitions would have on the competitiveness of the multi-trillion dollar health insurance industry,” and found them wanting. Assistant Attorney General for the Antitrust Division, joined Lynch in speaking to press.

If allowed to proceed, Lynch said, “these mergers would fundamentally reshape the health insurance industry,” and they would have an impact on the ability of tens of millions of Americans to access “quality affordable health care.” And so the DoJ is suing to block both of the mergers.

The big issues were threefold, Lynch and Baer said. The mergers would reduce competition for individuals shopping on the exchange, for employers shopping for packages for all their employees, and for Medicare recipients. In other words — basically everyone who uses health care.

“If the mergers take place,” Lynch said, “the competition among the insurers that has pushed them to provide lower premiums and higher quality care would be eliminated.”

Baer dove into more detail: “Half of Americans get health insurance from their employers,” Baer said. “For the largest, most sophisticated employers with multiple locations around the country, there are four good choices. Two are Anthem and Cigna.”

He continued, “They are two of a handful of options for employers … Anthem’s effort to buy Cigna affects price and quality competition. Cigna is unique in its collaboration. They are popular with employers and employees.

Baer explained the way in which Cigna negotiates with both employers and hospitals to reduce healthcare costs, but then said, “This competition would be lost as a result of the merger. Anthem claims that consumers will benefit if it becomes the 800-pound gorilla at the bargaining table, forcing cost concessions from doctors and hospitals without regard to the concessions having impact on quality of care.”

And that, said Baer, is a no go. “You do not get to buy a competitor and eliminate competition to increase your bargaining leverage. Allowing just one company to dictate how much doctors are paid is not good for doctors, hospitals, employees, or hard-working Americans.”

The proceedings, Lynch confirmed to media, are two separate suits, one being filed against each pair of companies intending to merge. They were “separate investigations” and “separate cases,” Lynch said. However, the two are being filed as “related” — and discussed together — because they share an impact on the same industry.

Media also asked if concessions and divestitures could make either transaction viable, but that seems to be a no-go. “There have been proposals made,” Baer said, “But they are inadequate, incomplete, and unlikely to solve the competitive problems we have identified.”

When asked if there was anything companies could do, Baer flatly replied, “We have seen nothing that suggests that.”

Our colleagues down the hall at Consumers Union (the policy and advocacy arm of Consumerist’s parent company, Consumer Reports) applauded the DoJ’s move.

“From the very beginning, we have raised concerns that these deals would create too much market power,” CU said in a statement. “We were concerned that these deals couldn’t be fixed by simply divesting assets here and there, or by promises that the companies wouldn’t take advantage of their new power. The Justice Department clearly shares our concerns about how these deals would impact consumers after its careful and thorough investigation.”

“If these insurance giants were allowed to merge, they would have too much control over what our health care choices would be. We commend the Justice Department for taking action to block what would be a major setback for consumers.”

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