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U.S. government blocks historic health insurance mega-mergers

by David Dennis, Contributing Reporter | July 26, 2016
Business Affairs
Anthem-Cigna and Aetna-Humana
deals deemed bad for competition
After a year of speculation about how this administration's antitrust regulators would respond to deals between four of the five biggest health insurers — Anthem-Cigna and Aetna-Humana — the outcome is now clear.

The Department of Justice (DOJ) announced last Thursday that it will file lawsuits to stop the formation of what would be the two largest health insurance companies in American history.

Attorney General Loretta Lynch announced that the government would intervene because “These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies.”

If the tie-ups went through, the five major private insurers in the nation would be reduced to just three and, Lynch said, “the competition among insurers that has pushed them to provide lower premiums, higher-quality care and better benefits would be eliminated.”

Combining Aetna and Humana, according to Bloomberg,would have created the largest provider in the private Medicare Advantage market, while the Anthem and Cigna consolidation would have formed the biggest insurer in terms of membership, mostly coming from services sold through employers.

The DOJ stated that these deals would raise health care costs and reduce choice for consumers. Coming at the same time, business and law experts said, the two deals stood out in the context of the administration’s antitrust policy, especially with regard to the health care industry. President Obama himself recently wrote an essay for the Journal of the American Medical Association promoting the need for competition to keep health care affordable for consumers.

In its complaint, the government said that the Anthem-Cigna deal would reduce competition in the market for commercial insurance from national employers as well as large-group employers in at least 35 metropolitan areas. The Aetna-Humana link-up would impact competition for at least 1.5 million customers in the Medical Advantage plans for the elderly, claimed the DOJ.

Critics of the proposed mergers had been resisting them since they were announced, resulting in pressures by consumer advocates and congressional hearings. Regulators in 12 states had given approvals, but as covered by the International Business Times, that process was tainted by ethics probes into regulatory reviews in Connecticut.

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