Justice Department to Challenge Two Health-Insurance Mergers--Update
20 July 2016 - 3:46AM
Dow Jones News
By Brent Kendall and Anna Wilde Mathews
The Justice Department is close to challenging Anthem Inc.'s
proposed acquisition of Cigna Corp. and Aetna Inc.'s planned
combination with Humana Inc., according to people familiar with the
matter, moves that would represent strong government pushback
against consolidation in the health-insurance industry.
Antitrust lawsuits against the planned mergers would be the
culmination of concerns the Justice Department has had about both
deals from the outset.
During a yearlong review of the mergers, the department's
skepticism hasn't subsided, people familiar with the matter
said.
These people said a final decision to challenge the deals could
come as soon as this week.
The Wall Street Journal previously reported the mergers were in
trouble at the Justice Department, with antitrust enforcers worried
the deals would reduce competition and harm consumers.
The companies, however, have been given the chance to try to
persuade the department that any antitrust problems raised by the
deals could be addressed by shedding assets to competitors. The
department has been skeptical that asset sales, or divestitures,
would adequately preserve the current level of competition.
Bloomberg News reported earlier Tuesday that the department was
poised to file lawsuits in the coming days.
A Justice Department spokesman declined to comment.
An Aetna spokesman said the company "doesn't comment on rumors
and speculation, but we are steadfast in our belief that this deal
is good for consumers and the health-care system as a whole."
Cigna and Anthem declined to comment. A Humana spokesman
couldn't immediately be reached.
The deals were bold moves to reshape the top of the
health-insurance business, collapsing the top five companies in the
industry to three. All of the merging companies argued they could
achieve cost savings and better results with the scale that their
combinations would bring, amid changes and challenges tied to the
Affordable Care Act.
The two deals raised different antitrust concerns, however, and
legal challenges are likely to focus on distinct issues. Analysts
believe that if the Justice Department does challenge both deals,
the insurers are likely to fight in court.
Anthem has previously told investors that it is likely to do so,
according to people with knowledge of the matter, and Aetna has
prepared a package of divestitures that it has argued would remedy
any competitive concerns.
The $48 billion Anthem-Cigna acquisition would create the
largest health insurer by enrollment, with more than 54 million
members, and $117 billion in annual revenue.
One major concern that Justice Department officials have
signaled is the effect on the national employer market, where the
combination would shrink the number of competitors to three from
four. Other worries included the merger's affect on individual
insurance plans -- the coverage sold in the exchanges that are at
the heart of the Obama administration's signature health law -- and
the impact on health-care providers, where a combined insurer might
have greater leverage in reimbursement negotiations.
Anthem has argued the national-employer market is far more
complex, with sophisticated customers who often divvy up their
business. It has said the individual markets would remain
competitive, and that it wished to cooperate with health-care
providers.
With Aetna's $34 billion proposed acquisition of Humana, much of
the antitrust focus has been on private Medicare plans, Humana's
main business. An Aetna-Humana combination would become the biggest
seller of Medicare Advantage plans, and have overall revenue of
about $115 billion combined based on 2015 totals.
Humana has a Medicare Advantage membership of about 3.19
million, or 17% of the national market, and Aetna has around 1.38
million, or 7%, according to Wells Fargo analysts. Among the areas
of greatest overlap are regions in Ohio, Florida and Missouri.
Missouri's insurance regulator has said the companies' combined
individual Medicare Advantage market share was more than 50%
statewide and above 90% in some counties.
Aetna has floated a package of Medicare Advantage assets,
attracting bids from major insurers. It also has said the full
competitive landscape for Medicare plans includes traditional
Medicare provided by the government.
If the deals do end up falling apart, all four companies will
remain considerably smaller than industry leader UnitedHealth Group
Inc.
Write to Brent Kendall at brent.kendall@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
July 19, 2016 13:31 ET (17:31 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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