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Stakeholders, pundits laud litigation to halt health insurer mergers


Key health care industry stakeholders and observers welcomed Thursday's U.S. Justice Department lawsuit to block the controversial megamergers of four of the nation's five largest health insurers on anti-competitive grounds, but others criticized the federal agency's stance.

The $37 billion merger of Aetna Inc. and Humana Inc. and the $54 billion deal to unite Anthem Inc. and Cigna Corp. would “threaten to increase insurance premiums, to reduce benefits, to lower the quality of health care and to slow innovation,” William Baer, principal deputy associate attorney general, said Thursday during a news conference announcing the litigation.

The American Medical Association applauded the suit, saying allowing the health insurers to merge would harm patients and the entire health care industry.

“The prospect of reducing five national health insurance carriers to just three is unacceptable. Given the mergers' potential to significantly compromise market competition, the AMA strongly supports the antitrust challenge from federal regulators,” AMA President Dr. Andrew W. Gurman said in a statement.

“The Department of Justice recognized that the health — both physical and financial — of the American people is at stake,” Topher Spiro, vice president of health policy at the nonpartisan Center for American Progress, said in a statement. The mergers “would have irreversibly transformed and destabilized the health care landscape at a critical juncture.”

The litigation “should stop misguided megamergers that would kill jobs and raise prices,” U.S. Sen. Richard Blumenthal, D-Conn., said in a statement.

David Balto, a Washington-based antitrust lawyer and former policy director at the Federal Trade Commission, said the decision is “awesome news for consumers throughout the country. An army of the most expensive lawyers and lobbyists tried to convince the Justice Department and Congress that these deals would benefit consumers … but it didn't work.”

However, a spokeswoman for health insurance industry lobbying group America's Health Insurance Plans said in a statement that “mergers among health plans can deliver significant benefits,” and urged federal regulators to set their sights on “anti-competitive provider mergers and the soaring cost of pharmaceuticals driven in part by anti-competitive pricing tactics.”

The spokeswoman also noted several states already approved the mergers.

The Aetna-Humana merger has obtained 18 of the 20 state approvals necessary to close the deal, while the Anthem-Cigna merger has garnered 12 of the 26 state approvals needed.

Experts say, however, that despite the states' decisions, the Justice Department has the ultimate say and analyzes competition issues differently than the states, many of which joined the suits.

California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, Virginia and the District of Columbia joined the federal government in the Anthem-Cigna suit.

The District of Columbia and eight states — Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania and Virginia — joined the suit against the Aetna-Humana merger.

Court battle

The health insurers vowed to fight the litigation, but analysts say their chances of winning are slim.

“Aetna and Anthem seemed pretty vigorous in their comments regarding their willingness to fight in court, but it's going to be an uphill battle, because the DOJ offered no potential resolution,” said James Sung, associate director and insurance credit analyst at Standard & Poor's Corp. in New York.

The Justice Department argued that divestitures the insurers proposed would fail to preserve competition. Still, the insurers could devise new divestiture plans to try to satisfy federal antitrust regulators, Mr. Sung said.

If the deals are ultimately blocked, Anthem would owe Cigna a $1.85 billion breakup fee and Aetna would owe Humana a $1 billion breakup fee, according to their merger agreements.