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As the proposed mergers of four of the largest health insurers in the country come down to regulatory scrutiny, experts offer no clear guidance to the outcome.
Multibillion-dollar deals between Aetna Inc. and Humana Inc., and Anthem Inc. and Cigna Corp., which would reduce the number of dominant health insurers to three from five, have sparked concerns over reduced competition, increased insurance prices and diminished health plan quality.
And while shareholders for each of the companies have given the go-ahead, the health insurers must secure approval from the federal regulators in the U.S. Department of Justice's antitrust division who have been hearing testimony from concerned business groups and antitrust experts alike, as well as state regulators.
Aetna and Anthem executives say they remain confident the deals will each close in 2016, but sources say it's anyone's guess.
Federal and state regulators' decisions will “come down to the numbers,” but also will include public interest concerns such as premium prices and the number of doctors in the plan network, said Thomas Greaney, an antitrust expert formerly with the Justice Department who is now co-director of the Center for Health Law Studies at St. Louis University School of Law.
Similar consumer-oriented issues came into play during the department's review of highly publicized deals between Comcast Corp. and Time Warner Inc., AT&T Inc. and DirecTV L.L.C., and others. AT&T completed its merger with DirecTV in July, while Comcast and Time Warner called off their transaction in April.
Most recently, the Justice Department has helped block two mergers among manufacturers: General Electric Co. and AB Electrolux on Monday called off a deal that would bring together two leading household appliance manufacturers. And on Friday, Tri-Union Seafoods L.L.C., doing business as Chicken of the Sea International, and Bumble Bee Foods L.L.C. abandoned a deal that would combine the second- and third-largest canned tuna sellers in the country.
Justice Department objections cited reduced competition in their markets, leading to higher prices for consumers.
Though manufacturing and health insurance industries differ widely, similar competitive issues could arise in the Aetna-Humana and Anthem-Cigna mergers.
In testimony on health insurance industry consolidation before a U.S. Senate subcommittee in September, Leemore S. Dafny, a former federal antitrust regulator and now a professor at the Kellogg School of Management at Northwestern University in Evanston, Illinois, pointed to studies showing consolidation in the health insurance industry led to higher premiums for consumers.
That was the case when Aetna merged with Prudential HealthCare in 1999, according to a 2012 study co-authored by Ms. Dafny.
“Economic research demonstrates that insurance industry consolidation in the past has not tended to improve the lot of consumers,” the testimony reads.
Then again, it's difficult to tell what the Justice Department will do based on outcomes of mergers in other industries, Mr. Greaney said.
While a cement manufacturer may be able to divest a plant in a certain region to satisfy the department's competition requirements, a health insurer faces the tougher task of finding a buyer for operations it need to divest, Mr. Greaney said.
“It can be a little problematic,” he said.
According to a Health Affairs blog written by Mr. Greaney, the Justice Department has challenged only four mergers of health insurance companies. In those cases, which took place between 1999 and 2012, all planned mergers got the go-ahead after agreeing to divest overlapping plans.
But the Aetna-Humana and Anthem-Cigna mergers trump those mergers in terms of overlapping plans. According to an analysis by the Chicago-based American Medical Association, the two mergers would slash competition in up to 154 metropolitan areas in 23 states.
In reviewing those markets where the health companies would overlap and compete, the Justice Department “has quite a task in front of it,” Mr. Greaney said.
Consolidation among four of the five largest health insurers in the United States is unlikely to jeopardize UnitedHealth Group Inc.'s position at the top of the industry, Moody's Investors Service Inc. said in a report released on Thursday.