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(Reuters) — Hospitals urged antitrust regulators this week to consider whether health insurer Anthem Inc.'s planned acquisition of rival Cigna Corp. would boost health care costs.
In a letter to the U.S. Department of Justice, the hospital industry's largest lobbying group said combining the No. 2 and No. 5 health insurers threatens to reduce competition in 817 geographic markets serving 45 million consumers.
In many of those markets, the American Hospital Association said, there are no strong competitors to buy assets that Anthem or Cigna might want to sell to pass muster with federal authorities. State insurance regulators will also look at the deal.
A Cigna spokesman did not have an immediate comment. An Anthem spokeswoman also did not have an immediate comment.
On July 24, Anthem announced plans to buy Cigna for $47 billion, the second major health insurer deal announced this summer. Aetna Inc. on July 3 inked an agreement with Humana Inc. The deals will reduce the number of national insurers to three from five.
Anthem and Cigna have said they expect the deal to pass antitrust scrutiny and that they have considered where asset sales might be needed.
The hospital association said in the letter dated Aug. 5 that it doubted Anthem and Cigna would find a suitable buyer for assets that provide insurance plans to millions of customers, also known as covered lives. Merging companies often will sell assets to a competitor if they believe it will help a larger deal pass regulatory scrutiny.
"In the 817 at-risk markets, over half the lives that need to be divested reside across 368 (metro regions) and rural counties with no divestiture possibility," the group wrote.
Anthem and Cigna may need to divest from 2.9 million to 3.7 million covered lives in the commercial business to preserve competition in those markets, it said, and 1.7 million to 2 million of those are in markets with no potential acquirer. The analysis was based on the Herfindahl-Hirschman Index that measures market concentration.
In the commercial self-funded insurance business, where employers pay Anthem and Cigna to manage benefits, 4.4 million to 4.7 million covered lives may need to be sold, and there is no satisfactory acquirer for 2.8 million to 3 million lives, the letter said.
The hospitals also urged the Justice Department to look at the reduced competition in the market for national customers, citing the Federal Trade Commission case against Sysco Corp., which the FTC ultimately won.
Anthem Inc. reported strong revenue growth and double-digit profit growth in the second quarter of 2015, primarily due to improved performance and enrollment gains in its government segments, the company announced on Wednesday.