Connecticut joined with 11 other states and the U.S. Department of Justice Thursday in filing a lawsuit to block the proposed merger of insurers Anthem and Cigna. The DOJ also moved to block Aetna Inc.’s planned merger with Humana Inc.
The two mergers would consolidate the nation’s five biggest health insurers into just three.
Connecticut Attorney General George Jepsen said that his staff has worked over the past year to investigate the impact of the merger on competition in the health insurance industry and concluded that the merger would “substantially lessen competition for the provision of healthcare insurance services, in that it would have a negative impact on both the availability of competitively priced healthcare and the quality of care in the state of Connecticut.”
Jepsen said they are asking the court to find the merger a violation of antitrust law and to permanently enjoin it from taking place.
During a livestreamed DOJ press conference, U.S. Attorney General Loretta Lynch said that if the mergers were allowed to proceed they “would fundamentally reshape the health insurance industry,” and “leave much of the multi-trillion dollar health insurance industry in the hands of three mammoth insurance companies, restricting competition in key markets.”
William Baer, principal deputy associate attorney general, said the mergers were “unprecedented” in both their scope and scale and put the system Americans rely upon for their healthcare at risk.
He said the four companies don’t need the deals to survive. He said all of the companies are doing well financially.
“Anthem claims that consumers will benefit if it becomes the 800-pound gorilla at the bargaining table forcing cost concessions from doctors and hospitals without regard of what those concessions would have on the quality of medical care,” Baer said. “The antitrust laws don’t work that way. You don’t get to buy out a competitor, eliminate substantial competition, just to increase your bargaining leverage with healthcare providers.”
He said both mergers also threaten competition in the public exchanges because all four companies compete in those marketplaces created by the Affordable Care Act.
In a statement, Anthem called the legal action by the Department of Justice an “unfortunate and misguided step backwards for access to affordable healthcare.”
Anthem said it would challenge the DOJ’s decision in court. It also said the DOJ’s decision to block the merger was based on “flawed analysis and misunderstanding of the dynamic, competitive and highly regulated healthcare landscape.”
Cigna, the company which Anthem sought to acquire, said it’s “evaluating its options.” The merger agreement says if the deal doesn’t happen, then Anthem will pay Cigna a $1.85 billion breakup fee.
A spokeswoman for the Connecticut Insurance Department, which was responsible for reviewing the Anthem-Cigna merger, said as a result of the lawsuit the department has “immediately suspended its review” of the application.
Connecticut was playing a leading role in the review of Anthem’s application to acquire Cigna. It was playing a lesser role in the Aetna-Humana merger, which it approved earlier this year.
In a joint statement, Aetna and Humana said they would “vigorously defend” their deal. The two companies, which offer Medicare supplemental plans, said they will be able to expand their offerings to more geographies, creating more options for consumers if the deal is allowed to go through.
If the deal doesn’t go through, Humana is supposed to receive a $1 billion breakup fee from Aetna.
Meanwhile, Baer said both Aetna and Anthem claim they can maintain competition in the market by divesting parts of their company to smaller insurance companies.
“But those proposed remedies are incomplete and impractical,” Baer said. “It would not give the buyers of the assets the necessary tools to compete with intensity that Cigna and Humana today provide.”
It would leave consumers at risk, Baer said.
He said mergers are not lawful if they risk giving consumers the ongoing benefits of the competition they currently experience.