US acts to block two mega-mergers

The US moved Thursday to prevent huge mergers involving four of the top five health insurers, hoping to stall industry consolidation and protect the gains of President Barack Obama's sweeping healthcare reforms.

The Department of Justice sued in the Washington, DC federal district court to block Aetna Inc's $37 billion takeover of Humana Inc., and Anthem Inc's $54 billion merger with Cigna Corp.

It said the mergers, first announced one year ago, would stifle competition for services everyone needs and harm millions of American consumers.

"For most Americans, health insurance is not a luxury, but a necessity," said Attorney General Loretta Lych, announcing the antitrust lawsuits.

"If allowed to proceed, these mergers would fundamentally reshape the health insurance industry."

"They would leave much of the multi-trillion 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."

The move comes as heath care and health insurance costs continue to rise significantly faster than overall inflation, and despite the efforts of the administration of President Barack Obama to press down prices and boost competition through the ambitious reforms of the Affordable Care Act, or "Obamacare."

- Mergers threaten Obamacare -

Many markets only have two or three companies offering health insurance policies, and in many of those with less competition, insurance costs are rising significantly. 

The Obamacare system sought to boost competition by creating insurer marketplaces in the states. But insurers working in that program, including the four involved in the mergers, are pressing for higher prices in many areas.

The largest insurer of all, UnitedHealth Group, has announced it would not continue to take part because it was not making money on it.

The government was joined by 16 states in the lawsuits seeking to prevent further erosion of competition under federal antitrust laws.

Aetna's takeover of Humana, announced on July 2, 2015, would join the country's third and fifth-largest health insurance companies, combining 37 million customers, with combined revenues last year of $114 billion.

The government suit focused particularly on their offering of Medicare Advantage, privately managed delivery of the government's Medicare health benefits programs for people over 65.

The government said the two companies compete head to head in about 90 percent of the US districts where Aetna offers the insurance.

Anthem, the country's second largest health insurer, proposed its acquisition of number four Cigna three weeks after Aetna's bid for Humana. It would create a giant with 54 million customers and $117 billion in revenues.

The Department of Justice said the two compete head to head in many markets and that by taking over Cigna, the "slow to innovate" Anthem would eliminate the threat from a more agile and effective rival.

The merger "would deprive consumers and healthcare providers of the innovation and collaboration necessary to improve care outcomes," the suit said.

- Companies to fight suit -

The companies have argued that the mergers would give them greater power to bargain lower prices with doctors, hospitals and drug providers, so they could cut costs to consumers.

But the government rejected that argument, saying the insurers would simply squeeze profits from service providers.

Aetna and Humana quickly announced that they would fight the lawsuits.

They said in a joint statement that their merger would not eliminate "robust competition" in Medicare related insurance. 

"There is an abundance of choice for seniors, and built-in protections," they said.

Anthem also said it would fight, calling the suit against its merger with Cigna "an unfortunate and misguided step backwards for access to affordable healthcare for America."

Cigna separately warned that the merger would not be completed this year. "The earliest it could close is 2017, if at all."

Shares for all four surged in Thursday trade after the suits, which had been expected, were announced.

Aetna was up 2.5 percent in mid-afternoon trade; Anthem gained 3.0 percent, Humana 7.6 percent, and Cigna 3.7 percent. UnitedHealth Group lost 0.2 percent.

Source: AFP