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DOJ Seeks to Block Two Major Health Insurance Mergers

The United States Department of Justice (DOJ) is suing to block two proposed mergers between major health insurance companies, claiming that the deals violate antitrust laws and would lead to increased health care costs for patients. As noted in an earlier blog post, the merger of Aetna and Humana, as well as Anthem Inc.’s acquisition of Cigna Corp., has faced many regulatory and antitrust hurdles since being announced last year. Several key stakeholders, including California insurance Commissioner Dave Jones, have expressed concern that the aforementioned mega-deals will result in an anti-competitive insurance market. Now, the DOJ has announced that it is challenging both mergers on the grounds that they "would lead to higher health-insurance prices, reduced benefits, less innovation, and worse service for over a million Americans."

The DOJ’s action continues a trend within the Obama administration with respect to taking legal and regulatory steps to preserve competition among health insurers. In the wake of the DOJ’s announcement, three of the health insurers immediately said they would challenge the lawsuits, spurring potentially protracted litigation. In a statement, Anthem asserted that “the DOJ’s action is based on a flawed analysis and misunderstanding of the dynamic, competitive and highly regulated health care landscape and is inconsistent with the way that the DOJ has reviewed past health care transactions.” Cigna’s reaction was more measured, as it indicated it was reviewing its options under the merger agreement and evaluating next steps.

One potential route forward is for the insurers to voluntarily abandon the transactions, turning their attention to a new round of potential deals that might pass regulatory muster. This would potentially include targeting smaller insurers, or buying only limited assets from larger companies.

Eleven states – California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia – and the District of Columbia joined the department’s challenge of Anthem’s $54 billion acquisition of Cigna.  Eight states –Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia – and the District of Columbia joined the department’s challenge of Aetna’s $37 billion acquisition of Humana.

Commentators have been quick to note that the Aetna – Humana deal has a stronger chance of surviving than the Anthem – Cigna deal. Aetna and Humana are believed to be in a better position to divest themselves of sufficient assets to appease regulators. However, at this point, it is anyone’s guess. M&R will follow this issue closely, and report on significant developments as they occur.

This blog post is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.