The Department of Justice is essentially arguing that if four big insurance carriers become two huge carriers, they will be not 'too-big-to-fail,' but 'too-big to-regulate-and-control,'" says a legal observer.
The two court proceedings attempting to block Anthem's attempt to buy Cigna for $48 million and Aetna's planned $37 billion purchase of Humana could come down to whether the judges are convinced that oversight by CMS is strong enough to keep two behemoth insurers in check.
The federal government is arguing that CMS isn't strong enough to protect Medicare Advantage, while the insurers say they would still have to toe the line.
A Washington, DC, judge began hearing arguments in the Aetna/Humana case Monday, and the proceedings are scheduled to last through Dec. 30. The Anthem/Cigna trial is underway in the same federal building, and the CEOs of both companies have testified about friction and lack of cooperation in merger activities.
The Department of Justice filed the lawsuits claiming that the mergers would hurt consumers by reducing competition, driving prices up and creating insurance giants that could do pretty much what they want.
But William D. Wilmoth, a healthcare attorney with Steptoe & Johnson in Wheeling, WV, says the insurers are arguing that antitrust is not a valid concern when the cases focus on consumer access to Medicare Advantage plans and not to general health insurance plans.
"In the same courthouse in Washington, two teams of DOJ lawyers are singing the same tune: Mergers of big health insurers are bad for competition," Wilmoth says.
"According to the DOJ lawyers challenging the Anthem/Cigna and Humana/Aetna mergers, if these four big carriers become two huge carriers, they will be not 'too-big-to-fail,' but 'too-big to-regulate-and-control.'"
The insurance companies are responding that the DOJ position might have worked pre-Affordable Care Act, but not now.
The Payers' Argument
"The insurers' lawyers say that the DOJ is living in a dream, contemplating an insurance world that no longer exists in these ACA days. They're saying they can combine and there still will be plenty of competition with CMS looking over their shoulders," he says.
"They are telling the judges hearing the two cases that CMS is enough of a regulator of rates and coverages that the courts need not worry about reduced competition."
Wilmoth says he sees some substance to the insurers' argument that CMS oversight makes the mergers less problematic than if the mergers involved private health insurance plans
"The thrust of the two cases seems to be the Medicare Advantage impact, so I think the cases might be seen differently if they were just the two business mergers themselves," Wilmoth says.
"This is a brave new world in insurance and these cases are going to be influenced by how much CMS can exert its influence over the Medicare Advantage plans, creating the same checks and balances that the free market does when you have more competitors. And how the new Trump administration might turn this whole antitrust policy thing on its head is anyone's guess."
The possibility of a more business-friendly federal government could lead Aetna to demand a full DOJ trial if the judge rules in favor of the DOJ's current motion for a preliminary injunction.
The New York Post reported this week that a source said Aetna is keeping its options open, since a DOJ trial would not happen until after the Trump administration is in place.
Gregory A. Freeman is a contributing writer for HealthLeaders.