Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: AAI urges DOJ to ‘just say no’ to health insurance company mergers, (Jan 11, 2016)

By Jody Coultas, J.D.

The American Antitrust Institute (AAI) expressed numerous concerns with the proposed mergers of Aetna and Humana and Anthem and Cigna in a January 11 letter addressed to Assistant Attorney General William J. Baer. The AAI urges the Department of Justice (DOJ) to reject to both mergers, since they will substantially lessen competition in numerous health insurance markets.

In the view of the AAI, the mergers would reverse the progress realized under the 2010 Affordable Care Act in delivering the benefits of more competition to consumers. The organization urged the DOJ to consider the consolidation in the healthcare supply chain designed to leverage up bargaining power. There was evidence that past insurance merges caused higher prices and other anticompetitive effects from past insurance mergers, according to the AAI. The letter highlighted the importance of considering Medicare Advantage as a distinct relevant market, in addition to commercial health insurance markets, and how existing contractual agreements could exacerbate the merger-induced loss of competition.

The AAI urges the DOJ to reject the enhancement of bargaining power as a rationale for the insurance mergers, as well as any arguments that entry could assuage competitive concerns or that regulation would constrain the exercise of market power post-merger. Divestitures on a massive scale necessary to fully restore competition lost by the mergers would be difficult and impractical, according to the letter. Evaluating two large mergers simultaneously will require the DOJ to engage in careful and difficult scenario analysis of markets and market dynamics under the assumption that either or both deals are allowed to proceed.

In July 2015, Anthem, a Blue Cross Blue Shield insurer, agreed to acquire all outstanding shares of Cigna for an estimated $54.2 billion. This would make Anthem the largest health insurance company by membership. Also in July 2015, Aetna announced an agreement to purchase Humana for $37 billion, which would combine the third- and fourth-largest insurers by revenue. The two mergers would reduce the number of major health insurance companies in the U.S. from five to three.

The American Antitrust Institute is an independent and nonprofit education, research, and advocacy organization, devoted to advancing the role of competition in the economy, protecting consumers, and sustaining the vitality of the antitrust laws.

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