NEW YORK • U.S. antitrust regulators moved Thursday to block two mega-insurance mergers, citing the potential loss of competition across the country, including in St. Louis and Missouri.
The Justice Department said the two pending multibillion-dollar deals — Anthem’s $54 billion proposed purchase of Cigna and Aetna’s $37 billion planned acquisition of Humana — would cut the number of large national insurers from five to three, unacceptably driving up prices and stifling innovation.
“These mergers would reshape the industry, eliminating two innovative competitors — Humana and Cigna — at a time when the industry is experimenting with new ways to lower healthcare costs,” the Justice Department said in court filings.
The health insurers have argued that the deals would allow them to expand their reach, becoming more efficient and helping check the rising cost of health insurance. But in a news conference to announce the lawsuits, Justice Department officials named several cities across the U.S., including St. Louis and Joplin, Mo., where consumers would be harmed due to less competition among health insurance providers.
In pointed comments about the deals, William Baer, assistant attorney general, said that these insurance companies are some of the most “sophisticated” firms in the country and “don’t need these deals to survive.”
The proposed mergers, he said, pose “unacceptable risks” to competition and would harm seniors, working families, individuals and employers.
The combination of Aetna and Humana, the lawsuit states, would reduce meaningful competition in Medicare Advantage plans in many communities, including 54 counties in Missouri. Overall, the lawsuit cited specific concerns about damage to 1.6 million people in 364 counties that are customers of Medicare Advantage.
“In nearly 90 percent of the counties where Aetna offers Medicare Advantage, it competes directly with Humana,” according to the Justice Department suit.
Medicare Advantage plans allow seniors in certain counties to enroll in health plans managed by private health insurers instead of having the traditional Medicare fee-for-service option. More seniors are enrolling in Medicare Advantage plans because they’re typically less expensive when it comes to out-of-pocket expenses and the benefits are more robust, according to the Justice Department.
The Justice Department suit says a merger between Aetna and Humana would also harm Missourians who buy health insurance on the exchanges, or HealthCare.gov, because Aetna and Humana are “two of the most significant” insurers on exchanges in Florida, Georgia and Missouri.
Missouri was the first state to move against the $37 billion merger between Aetna and Humana, citing its anti-competitive impact on consumers throughout the state. In May, Missouri’s top insurance regulator ruled that it would bar the merged company from selling certain plans in the state if the two proceeded with the merger. In its report, Missouri’s insurance department found that post-merger, the combined company’s market share in individual Medicare Advantage plans would exceed 70 percent in 33 counties.
Aetna had proposed divesting some of its Medicare Advantage plans to address potential antitrust issues, but the Justice Department said that remedy was inadequate.
Selling off plans is tricky, said Tim Greaney, health law and antitrust expert at St. Louis University. And it hasn’t always worked, he said.
“It’s a big undertaking and given an uncertainty to how it would work or who the buyers would be you could understand why they took a firm stand,” Greaney said.
“I think they’re being very clear that the DOJ is willing to fight this thing in court and pursue it to the end,” he said.
In the other suit, against Anthem-Cigna, the antitrust regulators said the $54 billion combination would substantially lessen competition in an already consolidated industry, harming millions of Americans, doctors and hospitals.
The Justice Department in the complaint said it was concerned about the impact on the national corporate business, which serves large companies that employ workers around the country and it said has only four competitors.
It also said there were issues with local business markets, the individual exchanges and the impact that a combined company could have on contracts with doctors.
The Justice Department also points to Missouri as a state that would experience significantly less competition as a result of the Anthem-Cigna deal.
“In the counties surrounding St. Louis, Cigna and Anthem are the second- and third-largest insurers on the public exchange. Combined, they insure over 81,000 lives on the Missouri public exchange — over 25 percent of all enrollees on the exchange,” according to the complaint.
Three of the four insurance companies condemned the government’s action.
Aetna and Humana said they plan “to vigorously defend the companies’ pending merger.”
Anthem called the Justice Department’s move “unfortunate and misguided step backwards for access to affordable healthcare for America.”
Cigna said it was currently evaluating its options. It does not believe the transaction would close in 2016, and the earliest it would close would be in 2017, “if at all.”
Opponents of the deals voiced their support.
“The prospect of reducing five national health insurance carriers to just three is unacceptable. Given the mergers’ potential to significantly compromise market competition, the AMA strongly supports the antitrust challenge from federal regulators,” Dr. Andrew W. Gurman, president of the American Medical Association, said in a statement.
Eleven states and the District of Columbia joined the Justice Department’s suit against Anthem and Cigna; eight states and the District of Columbia joined the suit against Aetna and Humana.
Despite the fact that Missouri is frequently cited in both suits as a state that would face substantial harm from these mergers, Missouri is not listed as a plaintiff in either suit.
Missouri Attorney General Chris Koster’s office said the state’s regulations regarding mergers are more “protective” of consumers. Koster also cited the earlier action by the state’s insurance regulators.
“Our state will be better served by continuing to enforce its own, demanding standards and negotiating on its own terms, than by binding Missouri’s fate to lawyers in Washington,” according to a statement from Koster’s office.
Reuters contributed to this report.
Samantha Liss • 314-340-8017
@samanthann on Twitter
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