DOJ Launches Suit to Block Health Insurance Mega-mergers

U.S. Attorney General Loretta E. Lynch says allowing Anthem's acquisition of Cigna and Aetna's acquisition of Humana would restrict competition and give the merged companies 'tremendous power' over the nation's health insurance industry.

The U.S. Department of Justice on Thursday filed suit to block two proposed mega-mergers that would consolidate four of the nation's five largest health insurance companies. 

The suit, filed in U.S. District Court for the District of Columbia, alleges that Anthem's proposed $54 billion acquisition of Cigna and Aetna's proposed $37 billion merger of Humana would harm consumers and healthcare providers by limiting price competition, reducing benefits, and decreasing incentives to provide wellness programs and lowering care quality.

"These mergers would fundamentally reshape the health insurance industry. They would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies, and restrict competition in key markets," Attorney General Loretta E. Lynch said at a late morning news conference.

If the mergers were to go forward, Lynch said, the number of health insurance options for employers would shrink from four to three, the largest and fastest-growing providers of Medicare Advantage plans would combine into one company, and competition for individual plans on the public exchanges would be substantially reduced.

"If the mergers take place, the competition among the insurers that have pushed them to provide lower premiums and higher quality care would be eliminated," Lynch said. "The mergers may increase the profits of Aetna and Anthem, but at the expense of consumers across America."

Eleven states: California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, and Virginia and the District of Columbia joined the department's challenge of Anthem's acquisition Cigna.

Eight states: Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania, and Virginia and the District of Columbia joined the department's challenge of Aetna's acquisition of Humana.

Payers Reaction: Suit 'Misguided'

Anthem and Aetna issued statements protesting the suit on Thursday morning, even before Lynch made the public announcement.  

"Today's action by the Department of Justice is an unfortunate and misguided step backwards for access to affordable healthcare for America," Indianapolis-based Anthem said.

"The DOJ's action is based on a flawed analysis and misunderstanding of the dynamic, competitive and highly regulated healthcare landscape and is inconsistent with the way that the DOJ has reviewed past healthcare transactions."

Aetna and Humana issued a joint statement vowing to mount a "vigorous defense" of their proposed merger.

"A combined company will result in a broader choice of products, access to higher quality and more affordable care, and a better overall experience for consumers," the payers said. "Aetna and Humana look forward to making this clear in court, where a judge will review the transaction based on its merits."

Providers Cheer Suit

American Medical Association President Andrew W. Gurman, MD, welcomed the suit and thanked the DOJ "for fighting to protect patients and physicians from a health insurance system dominated by a few corporate Goliaths with unprecedented market power. Patients are better served in a healthcare system that promotes competition and choice."

Gurman said competition in many health insurance markets is "already at alarmingly low levels" and that the federal government has an obligation to step in and enforce antitrust law.

"The prospect of reducing five national health insurance carriers to just three is unacceptable," he said. "Given the mergers' potential to significantly compromise market competition, the AMA strongly supports the antitrust challenge from federal regulators."

American Hospital Association President and CEO Rick Pollack called the suit "good news for consumers, who would have faced increased costs and fewer choices for coverage."

"Reduced competition in the insurance market threatens to increase the price and availability of coverage for all Americans in virtually every community. It would impede the progress our nation has made in providing affordable coverage to more people," he said. "Fewer coverage options for consumers also would undermine the hospital field's goal of keeping communities vital and healthy through continuous innovation."

Pollack said hospitals want to partner with insurers to transform care by making it more responsive to the needs of consumers, but that "all of the available evidence shows that as insurers get even larger, their willingness to innovate declines. That would be a setback that patients simply can't endure."

"DOJ made the right decision," he said. "We hope that it will also encourage insurers to become partners with the hospital field to further accelerate progress in access and affordability to better serve patients."