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The U.S. Department of Justice sued Thursday to block mergers that would reduce the pool of nationwide health insurers from five to three, citing reduced competition it said would hurt employers, consumers, doctors and hospitals.
In separate complaints filed in U.S. District Court for the District of Columbia, the government, 11 states and the District of Columbia sought an injunction to halt the $54 billion merger of Anthem Inc. and Cigna Corp. The government, eight states and the District of Columbia also sued to stop the $37 billion merger of Aetna Inc. and Humana Inc.
Three of the four health insurers vowed a vigorous defense of the deals that were announced about a year ago.
“Our investigation showed these mergers are likely to harm competition that benefits seniors, working families, individuals, employers, the previously uninsured or underinsured, as well as doctors and hospitals,” Principal Deputy Associate Attorney General William Baer said during a news conference.
“These four are already some of the largest, most sophisticated companies in the country. They are thriving as independent firms. They do not need these mergers to survive. And consumers are entitled to benefit from their continued competition,” Mr. Baer said.
In particular, he said the Anthem-Cigna deal, if allowed to proceed, would likely harm competition and raise prices in the employer market, while the Aetna-Humana deal would reduce competition for consumers in the Medicare Advantage market.
Furthermore, the mergers would reduce competition for those seeking health insurance in the public exchanges established by the health care reform law, he said.
Though the health insurers proposed several divestiture plans to remedy competition concerns, Mr. Baer said those remedies included divesting “bits and pieces” of business to smaller, regional health insurers, a strategy he called “incomplete and impractical.”
The regional insurers would not be able to restore the competition that Cigna and Humana provide the market, he said.
Even so, the health insurers vowed to fight the lawsuit.
In a statement, Hartford, Connecticut-based Aetna and Louisville, Kentucky-based Humana jointly said they plan “to vigorously defend the companies' pending merger.” They argued that combining would indeed benefit consumers and Medicare Advantage customers.
Indianapolis-based Anthem said in a statement that the decision is “an unfortunate and misguided step backwards for access to affordable health care for America.” While Anthem said it is “fully committed to challenging the DOJ's decision in court,” it also said it would “remain receptive to any efforts to reach a settlement” with the Justice Department to allow the deal to be completed.
However, Bloomfield, Connecticut-based Cigna, seemed less committed to fighting the suit.
“Given the nature of the concerns raised by the DOJ and the overall status of the regulatory process, which under the terms of the merger agreement was led by Anthem, Cigna is currently evaluating its options consistent with its obligations under the agreement,” Cigna said in a statement. The insurer also said it believes the earliest the deal could close is 2017.
In the litigation, the Justice Department described Anthem as having a reputation for having “poor customer service” and “being difficult to work with,” while it said Cigna has “highly regarded customer services” and that it “works closely with doctors and hospitals.” Without the merger, the Justice Department said Cigna could double its size in the next seven to eight years.
Whether it's to establish global reach, enter new lines of business or to combat overcapacity, the insurance segment has been alive with merger activity in 2015. Just this week, two megamergers took place. Here's a look at what's happening: