Feds Sue to Block Huge Health Insurance Mergers

(CN) - The Justice Department said Thursday it is suing to stop two major health insurance mergers because the proposed deals will increase health care costs for the insured while also lowering the quality of care they receive.

Aetna Inc. proposed last summer to buy Humana Inc. for $34 billion, while Blue Cross-Blue Shield insurer Anthem Inc. moved to acquire Cigna Corp. for $48 billion.

During a news conference, Attorney General Loretta Lynch told reporters the government decided to block the mergers because it came to believe they would negatively "reshape the health insurance industry ... restricting competition in key markets where tens of millions of Americans rely on [those competitors] to receive health care."

"The number of health insurance options available to employers would shrink from four to three," Lynch said. "Two of the largest and fastest growing providers of Medicare and Medicare Advantage providers, which millions of senior citizens rely on for crucial medical coverage, would combine into one."

And that, Lynch said, could only be bad news for consumers.

"The competition among insurers that pushed them to provide lower premiums and higher quality care would be eliminated," she said. "The mergers may increase the profits of Aetna and Anthem but at the expense of consumers."

Baer called the potential mergers "unprecedented in scope and scale" and added that not only would quality of care be slowed but innovation as well.

"They do not need these deals to survive," he said. "They are thriving as independent firms."

Anthem, based in Indiana, is the country's second largest health insurance provider and the largest member of the Blue Cross and Blue Shield Association. The company reported over $79 billion in revenue last year. Aetna, based in Connecticut, trails right behind Anthem, operating in every state to the tune of $60 billion in reported revenue. Cigna and Humana earned $38 billion and $54 billion respectively in 2015.

Though all of the health insurers are independently profitable, Baer explained the chilling effect the mergers would have on things like innovation or a patient's access to skilled doctors.

"Let's look at Anthem's purchase of Cigna ... Anthem is unique in its popularity with employers and employees. They have tried to keep prices down and they adopt their own innovation strategies to prevent Cigna from winning business," Baer said.

"[Anthem and Cigna currently] compete to sign up doctors at hospitals to provide a comprehensive network of care and that competition would be lost as a result of the merger," he added.

Baer also noted that though Anthem may think it wise to be the "800 pound gorilla at the bargaining table," forcing concessions and sweetheart deals with doctors and hospitals, this apparent power play would not be tolerated.

"You do not get to buy a competitor and eliminate competition to increase your bargaining leverage with health care providers," he said. "Allowing just one company to dictate how much doctors are paid is not good for doctors, hospitals or employees."

Industry competition opened the door to vital programs for seniors, like the offering of Medicare Advantage coverage, launched by Humana in 1997.

According to the Justice Department, Aetna's hand was forced and in an effort to remain viable, Aetna also offered Medicare advantage enrollment plans for seniors. Competition like this equates to a win-win scenario for those who support the premise behind legislation like the Affordable Care Act: reasonably priced insurance coverage options for all.

"This deal would eliminate Humana as a fierce competitor and seniors ... will not have any meaningful choices when they sign up for the Medicare Advantage program. In many areas, their choices will be limited, benefits reduced and their premiums will go up," Baer said.

According to a DOJ statement, communities named in the suit that would be most directly affected include "individuals and families on the public exchanges in 17 counties in Florida, Georgia and Missouri, affecting more than 700,000 people in those counties."

Both Aetna and Humana said Thursday that they are still in talks with the Justice Department over approval of their merger, but the companies have also indicated that they plan to fight the lawsuit once it is filed.

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