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Senate Democrats ask DOJ to block health insurer mergers

Senate Democrats ask DOJ to block health insurer mergers

A group of Senate Democrats on Wednesday urged the Justice Department to block the proposed Aetna-Humana and Anthem-Cigna mergers, which would shrink the number of national health insurers to three from five.

In a letter, seven senators argued that the pending mergers, which are under review by state and federal antitrust regulators, would threaten jobs, raise health insurance premiums for businesses and individuals, and reduce the quality of health care.

The letter addressed to Principal Deputy Assistant Attorney General Renata Hesse, leader of the Justice Department's antitrust division, was signed by U.S. Sens. Richard Blumenthal, D-Conn; Al Franken, D-Minn.; Elizabeth Warren, D-Mass.; Sherrod Brown, D-Ohio; Edward J. Markey, D-Mass., Dianne Feinstein, D-Calif.; and Mazie K. Hirono, D-Hawaii.

“These mergers would make an already concentrated market significantly less competitive,” the letter states.

In particular, the senators said the merger between Aetna Inc. and Humana Inc. would harm the Medicare Advantage market, while the deal between Anthem Inc. and Cigna Corp. would diminish competition in both the Blue Cross Blue Shield and national commercial markets.

The Aetna-Humana deal has been approved in 16 of 20 states necessary, while the Anthem-Cigna merger has garnered 12 of 26 state approvals needed. Both mergers must also be approved by the Justice Department.

While executives at Aetna and Anthem claim their respective mergers still are expected to close this year, both deals have run into roadblocks. California Insurance Commissioner Dave Jones last week spoke out against the Anthem-Cigna merger, labeling it “anti-competitive.” Observers are also concerned that publicized disputes between Anthem and Cigna senior executives could derail the merger.

As for Aetna-Humana, Missouri became the first state to oppose the deal in a May decision.

In the letter, the senators argue that less competition will drive prices up for consumers. They point to the 1999 merger between Aetna and Prudential Healthcare, which resulted in a 7% increase in large group premiums over a nine-year period, according to a 2012 study.

The senators also said that research shows increased consolidation could stifle innovation and lead to lower quality insurance products.

Moreover, the lack of competition could harm the health care law's public health insurance exchanges, the letter states. The senators also raise concerns about the potential for job loss if the mergers are approved.

Requiring the insurers to divest parts of their business to address antitrust concerns would prove ineffective, the letter states, pointing to several instances in the health insurers' own merger histories. For example, the senators point out that when Humana made divestitures to acquire Arcadian Management Services in 2012, two of its three buyers exited at least half of their acquired markets within a few years.

“The fact that these mergers are occurring in a rapidly consolidating health insurance industry is particularly troubling, as it raises the specter of higher health costs for small and medium-sized businesses, making it more difficult to expand and hire more workers. Families facing higher premiums may similarly be harder pressed to spend household income in their local economies,” the letter reads.

In a Wednesday research note, Ana Gupte, analyst with Leerink Partners L.L.C. in New York, said the senators' opposition is unlikely to stop the Aetna-Humana deal, which she says has at least an 80% chance of closing. The Anthem-Cigna deal, however, has less than 50% probability of landing approval, she said.