AET Aetna Inc. (delisted)

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 government lawsuit challenging the Anthem-Cigna combination alleged the deal "would combine two of the few remaining commercial health-insurance options for businesses and individuals in markets throughout the country. And in doing so, it would substantially lessen competition, harming millions of American consumers, as well as doctors and hospitals."

The department's legal complaint against the Aetna-Humana deal said it "would lead to higher health insurance prices, reduced benefits, less innovation and worse service for over a million Americans."

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 11:27 ET (15:27 GMT)

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