Aetna and Anthem Respond to DOJ Suit

July 26, 2016

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Source: BenefitsPro

In retrospect, it seems odd that so many business analysts expected the U.S. Department of Justice to approve the proposed mergers of four enormous health insurers.

From the time the proposed deals were announced last year, consumer advocates and Democratic politicians weren’t warm to Aetna’s plans to acquire Humana or Anthem’s plans to buy Cigna. The acquisitions, if approved, would shrink the number of large health insurers in the country from five to three.

While many on the left have accused the Obama administration of coddling insurance companies, most notably by enshrining their role in the health care system through the Affordable Care Act, the president and his allies have also been vehement that the insurance business needs strong governmental oversight.

The suit announced by the Justice Department on Thursday outlined many of the arguments against the deal that have been floating around for the past year.

“The Obama administration has had robust antitrust enforcement in the realm of mergers, particularly in health care,” Matthew L. Cantor, an antitrust attorney at Constantine Cannon, told The New York Times. “Anyone who’s going to attempt a horizontal merger should take note of that and particularly consider the antitrust merits of the deal.”

But both Aetna and Anthem remain adamant that they will prevail in court.

In a lengthy statement pledging to fight “vigorously” to preserve the merger, Aetna outlined its defense against the Justice Department allegations, in particular the government’s assertion that its acquisition of Humana, a major Medicare Advantage player, would significantly reduce competition in the Medicare Advantage market.

Contrary to assertions that the merger would reduce the number of Medicare Advantage options in many regions, Aetna asserts that the merger will allow the newly formed company to offer private sector Medicare plans in more areas of the country.

Aetna also rejected the notion that Medicare Advantage is in danger of being an uncompetitive market. Ninety-one percent of Medicare Advantage participants can choose from at least five carriers, it contends. Furthermore, it argued that the Medicare Advantage market should be considered in the context of the broader Medicare market, 70 percent of which is still occupied by the traditional, government-run health care program.

“A combined company will result in a broader choice of products, access to higher quality and more affordable care, and a better overall experience for consumers,” said the statement.

In an interview with the New York Times, Aetna CEO Mark Bertolini said, “I like my chances in front of a judge.”

Anthem’s response provided far fewer details, but it similarly argued that its merger with Cigna would create “efficiencies” that would allow it to deliver more affordable products to customers. It also said that it was open to coming to a settlement that would involve selling off some of its assets.

Other major health care groups cheered the administration for trying to block the mergers.

“Fewer coverage options would also undermine the hospital field’s goal of keeping communities vital and healthy through continuous innovation,” said Richard Pollack, head of the American Hospital Association, in a statement.

The American Medical Association, which has testified against the merger in talks with Justice Department, similarly applauded the suit, saying the health insurance market was already lacking in robust competition.

“Today’s action by the DOJ acknowledges the AMA’s concern that patients’ interests can be harmed when big insurers acquire rivals and develop strangleholds on local markets,” it said in a statement. “Allowing commercial health insurers to become too big and exert control over the delivery of health care would be bad for patients and vitality of the nation’s health care system.

In support of the Justice Department, some state attorneys generals have joined the suits because of the specific affect they say one or both of the deals will have on competition in their states. Eight states — Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania, and Virginia — joined the suit against the Aetna-Humana merger, while 11 states — California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, and Virginia — joined the suit against the Anthem-Cigna merger.

The attorneys general joining the Obama administration’s efforts against the mergers included Democrats and Republicans. Even Pam Bondi, the polarizing Republican attorney general of Florida, who earlier this week regaled delegates at the Republican National Convention with a speech calling for Hillary Clinton’s imprisonment, said that she would join the suit against the Aetna-Humana deal, saying it was “important we do everything to preserve competition in these markets.”

In some cases, attorneys general are disregarding the recommendation of their state’s regulatory authorities in favor of the merger. For instance, although the Aetna-Humana merger was recently approved by the Illinois Department of Insurance last month, Illinois Attorney General Lisa Madigan announced Thursday that she would be suing to block the deal.

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