The Justice Department on Thursday gone to live in keep your health insurance industry more competitive by suing to block two mega mergers.
The deals – Anthem's $54 billion proposal to buy Cigna and Aetna's $37 billion deal to buy rival Humana – would reduce the number of large national insurers from five to three.
In its suits, Loretta Lynch's Justice Department said the mergers “would reshape the industry at any given time when the market is tinkering with new ways to lower health care costs.
“Other insurers lack the scope and scale to fill this competitive void,” Justice said within the lawsuits, both filed in federal court in Washington, DC, adding that “each of the big three would have almost twice the revenue from the next largest insurer.”
Anthem and Cigna would be the only two big American insurers serving those who are self-insured – and regulators are concerned that combining them can lead to higher prices.
The Post on May 20 was the first to report the DOJ did not like the Anthem deal.
The Aetna block is much more controversial as Justice is concerned the combined company would have too large an industry share serving Medicare Advantage patients.
Aetna countered by telling antitrust investigators it would not be able to raise Medicare Advantage prices as customers would certainly switch to traditional Medicare, sources acquainted with the private talks told The Post.
“Congress created the Medicare Advantage enter in 1997 to offer seniors a market-based alternative to traditional Medicare,” Justice argues in the lawsuit. “Humana and Aetna are two from the largest and fastest-growing Medicare Advantage competitors in the united states.”
“Competition between Humana and Aetna has resulted in lower premiums, more generous benefits, better provider networks, and improved coordination of care,” court papers allege.
Jefferies, inside a report this week, said it believed Aetna would offer to Justice as a remedy to get the deal approved to market much more than the 350,000 Medicare Advantage accounts it presently has up for grabs.
“Conversations with legal experts suggest the offer is much more prone to go through these days,” Jefferies said, however with a high cost.
“Under historical concentration frameworks, about 400,00 to 500,000 Medicare Advantage accounts have to be divested,” Jefferies said, noting that Aetna can give up “as many as A million lives before the deal wouldn't be accretive.”
Aetna said hello “plans to vigorously defend the companies' pending merger.”
Humana's shares were up 7.2 percent in mid-day trading to $169.80, showing Wall Street believes an answer can be reached. Aetna shares gained 2.9 percent, to $119.88.
Anthem said hello was “fully committed to challenging the DOJ's decision in the court and can remain receptive to the efforts to reach funds with the DOJ that will allow us to complete the transaction and deliver its benefits in a critical time when Americans are seeking top quality health care services with greater value at less cost.”
Cigna's shares rose 3.4 percent to $137.57. Anthem shares gained 2.9 % to $139.37.
