U.S. Files Lawsuits Challenging Health Insurer Deals--Update
July 21 2016 - 11:22AM
Dow Jones News
By Brent Kendall and Anna Wilde Mathews
U.S. antitrust enforcers on Thursday filed lawsuits challenging
Anthem Inc.'s proposed acquisition of Cigna Corp. and Aetna Inc.'s
planned combination with Humana Inc., alleging the mergers would
produce an unacceptable reduction in competition.
The antitrust lawsuits are a bold response by the Justice
Department to aggressive efforts by the nation's leading health
insurers to consolidate. Had the department allowed the deals, the
top five national health insurers would have consolidated into
three giant companies, each with revenue of more than $100 billion
a year.
The department filed the lawsuits in a Washington, D.C., federal
court, asking a judge to block the mergers. The department has
scheduled an 11 a.m. ET press conference to discuss the
lawsuits.
The lawsuits come at the twilight of the tenure of President
Barack Obama's antitrust enforcers, who have blocked several
controversial mergers, even as they've approved others with
conditions attached.
The insurance battle gives the Justice Department at least one
more major antitrust case to battle in court before the current
crop of enforcers gives way to a new administration.
Antitrust enforcers have won most of the cases they have brought
in recent years, though there have been occasional setbacks,
including court rulings that went against Federal Trade Commission
challenges to hospital mergers.
The $48 billion Anthem-Cigna acquisition would create the
largest health insurer by enrollment, with more than 54 million
members, and $117 billion in annual revenue.
Aetna's $34 billion proposed acquisition of Humana would allow
it to become the biggest seller of Medicare Advantage plans, and
have overall revenue of about $115 billion combined based on 2015
totals.
Both deals were announced last summer.
Anthem and Cigna put out separate statements setting markedly
different tones, amid lingering tension between the two companies.
Anthem said it is "fully committed to challenging the DOJ's
decision in court but will remain receptive to any efforts to reach
a settlement." The company called the lawsuit "an unfortunate and
misguided step backwards for access to affordable healthcare for
America" and said its deal will benefit consumers.
Cigna noted that Anthem had led the regulatory process and said
it is "currently evaluating its options consistent with its
obligations under the agreement" with Anthem. Cigna said it
believes the acquisition will close in 2017 at the soonest, "if at
all." Cigna also emphasized its strength as a stand-alone company
in its statement.
In a joint statement released Thursday, Aetna and Humana said
they would "vigorously defend" their deal, arguing it will improve
coverage options and bring down costs for Medicare beneficiaries.
The companies said that the Medicare market is extremely
competitive, including the option of coverage provided directly
from the government as an alternative to private Medicare Advantage
plans. They also said "any perceived competition concerns can be
addressed through divestitures." Aetna already has presented
various divestiture options to the Justice Department.
If the deals are blocked, both insurers that were set to be
acquired would be due to receive substantial breakup fees. Humana
is supposed to receive $1 billion from Aetna, according to the
merger agreement. Cigna would be in line to get $1.85 billion from
Anthem, though the fee wouldn't be owed if Cigna makes a "willful
breach of its obligations to complete the mergers," according to
the companies' proxy statement, leaving the door open to possible
litigation by Anthem against Cigna, in the wake of tension between
the two companies.
Write to Brent Kendall at brent.kendall@wsj.com and Anna Wilde
Mathews at anna.mathews@wsj.com
(END) Dow Jones Newswires
July 21, 2016 11:07 ET (15:07 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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