Good news for health consumers! Last week, the US Justice Department (USDOJ) announced it is suing to block the Anthem-Cigna and Aetna-Humana mergers, which have been under intense scrutiny by regulators and consumer advocates. The suits allege these deals violate antitrust laws and will harm consumers, seniors, working families and individuals, and employers and healthcare providers by limiting competition, reducing benefits, decreasing incentives for innovation, and lowering the quality of care. The mergers would reshape the industry by turning the U.S.’s five biggest health insurers into three. Health Access and other consumer advocates applaud the Justice Department’s action to block both mergers.
U.S. Attorney General Loretta Lynch explained the decision at last Thursday’s press conference:
If allowed to proceed, these mergers would fundamentally reshape the health insurance industry. They would leave much of the multitrillion-dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care…Not only the bank accounts of the American people would suffer–but also the American people themselves.
California Joins Justice Department in Suit to Block Anthem-Cigna Merger
California, along with 11 other states and the District of Columbia, joined the Justice Department’s antitrust suit to block the proposed $48.3 billion merger of Anthem and Cigna.
In a press release, California Attorney General Kamala Harris stated:
We have seen significant consolidation in the healthcare provider and insurance marketplace over the course of the past several years. In some circumstances, these mergers can create benefits for consumers, including more innovation, more coordinated healthcare and better healthcare delivery. The proposed merger between Anthem and Cigna does not strike that balance, and would drive up costs to consumers and reduce access to quality healthcare for millions of Californians.
California did not join the suit to block the Aetna-Humana merger because Humana does not have significant market share in the state.
Health Access Advocacy on Insurer Mergers
Health Access has testified before public hearings at the Department of Managed Health Care (DMHC) and the California Department of Insurance (CDI) and submitted extensive written comments about how these mergers will negatively impact California consumers. History has shown that insurer mergers result in less competition, fewer choices, and higher prices, with little or no benefit to consumers. We highlighted Anthem and Aetna’s history of failing to abide by basic consumer protections, arguing they should not be allowed to get bigger unless they get better. These insurers claim the mergers are necessary to improve efficiency and better coordinate care. None of the companies, however, have provided details about how these benefits would be achieved, and how consumers will actually benefit in the form of lower premiums, lower out-of-pocket costs, higher quality care, and reduced health disparities.
Insurers Sought Approval from California Regulators
USDOJ and state insurance regulator approval is required for both deals to go through. DMHC approved the Aetna-Humana merger on June 20, requiring enhanced oversight of Aetna’s rates because of its history of proceeding with unreasonable rate increase, among other conditions. The Anthem-Cigna merger is still pending at DMHC.
CDI does not have direct authority over these mergers because none of the companies involved are domiciled in California. Insurance Commissioner Dave Jones held public hearings and recommended the Justice Department block both. (See his letters to USDOJ about the Anthem-Cigna and Aetna-Humana mergers.)
The courts will start reviewing the lawsuits and schedule proceedings. The companies can choose to fight USDOJ in court, settle the case, or abandon the merger.
The merger agreements include provisions requiring the payment of a termination, or break-up fee, if the merger fails. Anthem would owe Cigna a $1.85 billion breakup fee, and Aetna would have to pay a $1.69 billion termination fee to Humana. We need to make sure consumers don’t end up paying for these break-up fees through higher premiums.
Even if these megamergers fail, we can expect to see more consolidation within the health insurance industry.
- San Francisco Chronicle: California Moves to Block Anthem-Cigna Deal, July 21, 2016
- KQED: California Attorney General Joins Federal Suit to Block Anthem-Cigna Merger, July 21, 2016
- State of Reform: Anthem, Cigna, advocates react to DOJ blocking merger, July 21, 2016
Learn more about Health Access’ work to protect consumers on our Merger Watch page.