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From Antitrust Law Daily, July 21, 2016

U.S. sues to block Anthem-Cigna, Aetna-Humana deals

By Jeffrey May, J.D.

Two proposed mergers that would have reduced the country's "big five" health insurers to three have been challenged by the U.S. Department of Justice. Today, the Justice Department, 11 states, and the District of Columbia filed a complaint in the federal district court in Washington, D.C. to block Anthem’s $54 billion acquisition of Cigna. Eight states and the District of Columbia joined the Justice Department in its action to stop Aetna’s $37 billion attempt to buy Humana (U.S. v. Aetna, Inc., Case 1:16-cv-01494; U.S. v. Anthem, Inc., Case 1:16-cv-01493).

"These mergers would fundamentally reshape the health insurance industry," Attorney General Loretta Lynch said at a press conference held this morning, announcing the lawsuits. The deals would "eliminat[e] two innovative competitors—Humana and Cigna—at a time when the industry is experimenting with new ways to lower healthcare costs," the government alleged.

Anthem’s acquisition of Cigna. Anthem’s proposed $54 billion acquisition of Cigna would be the largest merger in the history of the health-insurance industry, the government asserted. Anthem, the largest member of the Blue Cross and Blue Shield Association, competes in 14 states as the Blue licensee and partners with other Blue plans to compete throughout the country. Cigna is another commercial health-insurance option for businesses and individuals in markets throughout the country. William Baer, Principal Deputy Associate Attorney General and former head of the Antitrust Division, expressed concern that the combination of these firms would limit choice for employers in some of the biggest cities in the country, such as New York, Los Angeles and Atlanta, where Anthem and Cigna are two of just a handful of options for employee health insurance.

"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 impact those concessions would have on the quality of medical care," Baer said at this morning’s press conference. "The 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."

According to the complaint, the combination of Anthem and Cigna would substantially lessen competition for the sale of health insurance to national accounts in the parts of the 14 states where Anthem sells under a Blue license and in the United States generally. Based on market concentration, the transaction is presumptively unlawful in those markets, it was alleged. The government also contended that the transaction would substantially lessen competition for the sale of health insurance to large-group employers in 35 metropolitan areas, and would be presumptively unlawful in 20 of those markets.

The Justice Department also identified potential anticompetitive effects in the sale of health insurance on the public exchanges in Colorado and Missouri. Lastly, the government alleged that the proposed merger would eliminate competition between Anthem and Cigna for the purchase of health care services in 35 metropolitan areas. Anthem’s leverage over physician practices that receive "take-it-or-leave-it" terms and over hospitals and physician groups that individually negotiate their contracts and rates with Anthem would purportedly be enhanced by the deal.

Aetna-Humana merger. If allowed to proceed, the acquisition by Aetna—the nation’s third-largest health-insurance company—of Humana—the fifth-largest health insurer—would allegedly enhance Aetna’s power to profit at the expense of seniors who rely on Medicare Advantage and individuals and families who rely on the public exchanges for health insurance. According to the government, the merger is presumptively unlawful in hundreds of local markets for Medicare Advantage where Aetna and Humana currently compete. In addition, Aetna’s proposed merger with Humana threatens to harm those who rely on the public exchanges to buy health insurance, particularly in Florida, Georgia, and Missouri, the government alleged. The complaint identifies 17 relevant geographic markets for the sale of health insurance on the public exchanges impacted by the proposed deal in those three states.

Proposed remedies. The attorney general said that the Justice Department was willing to engage in settlement discussions. However, Baer said that the parties’ proposed divestiture remedies were "inadequate, incomplete, and unlikely to solve the competitive problems." Litigation appears to be the more likely resolution.

Continuing litigation. Aetna and Humana vowed to vigorously defend the companies’ pending merger in court. Cigna, on the other hand, said it was evaluating its options consistent with its obligations under the agreement. The actions were filed as related matters, which will permit the same judge to consider the proposed transactions.

David Balto, counsel for the Coalition to Protect Patient Choice, which voiced its opposition to the mergers, said that the Coalition stands ready to support the Justice Department in its actions and to keep educating the public about the importance of competition.

"Together the companies spent over $400 million on these deals," Balto added. "But consumer advocates weren't fooled, and all that money couldn't change the facts."

The Justice Department and merging parties generally agree to proceed directly to trial on the merits in order to obtain permanent injunctive relief in merger challenges. If the parties do intend to pursue the mergers, the trials will likely be held later this year or early in 2017.

Companies: Aetna, Inc.; Anthem, Inc.; Blue Cross and Blue Shield Assn.; Cigna Corp.; Humana, Inc.

MainStory: TopStory AcquisitionsMergers Antitrust AntitrustDivisionNews

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