U.S. antitrust regulators have privately expressed concerns
about Anthem Inc.'s $48 billion proposed acquisition of Cigna
Corp., and are skeptical that the health insurers can offer
concessions that would fully preserve competition in the industry,
according to people familiar with the matter.
Company representatives met June 10 in Washington with Justice
Department staffers and representatives of more than a dozen state
attorneys general, the people said. At the meeting, government
officials outlined their worries about combining two of the
nation's top health insurers, the people said.
Merging companies sometimes can win government approval by
offering to sell assets or agreeing to other restrictions on their
operations, but government staffers told the companies they weren't
optimistic Anthem and Cigna could offer satisfactory fixes, the
people said.
The companies have other meetings scheduled for this coming week
with top Justice Department officials, the people said. Such
meetings give companies a chance to make their case to decision
makers about why a deal wouldn't hurt competition. Some of the
people said the department hasn't yet made a decision on whether to
sue to block the deal.
"We have been in ongoing dialogue with the Justice Department
and state regulators regarding the compelling combination of our
two companies to increase consumer access to high-quality,
affordable health care," an Anthem spokeswoman said. "Given that
the process is ongoing, it would be inappropriate to comment on our
actual discussions." A Justice Department spokesman declined to
comment, as did a Cigna spokesman.
As of early May, Anthem and Cigna were expecting a decision on
approval from the department by July 2, according to internal
correspondence reviewed by The Wall Street Journal. The companies
now expect to hear by mid-July, a person familiar with the matter
said.
Anthem has said that it has minimal overlap with Cigna in terms
of geography or products, and that the deal would bring down costs
and improve offerings for customers.
If completed, it would create the largest U.S. health insurer by
number of members with more than 54 million, with $117 billion in
annual revenue. The deal was struck last summer during a wave of
tie-ups, including Aetna Inc.'s pending $34 billion purchase of
Humana Inc., that would reduce the five biggest health insurers to
three.
Of the two, Anthem-Cigna is thought by investors to have the
tougher road to approval. The two companies compete in the market
for administering health benefits for national companies, unlike
Humana, which is mostly known for its strong Medicare
franchise.
In the meeting earlier this month, Justice Department officials
outlined key areas where they say a combination of Anthem and Cigna
could hurt competition, the people said. A major concern is the
national employer market. The Justice officials said they believed
the deal would shrink the number of competitors to three from four.
In addition to Anthem and Cigna, that list includes Aetna and
UnitedHealth Group Inc.
Anthem said at an investor conference in May that the
national-account business is more competitive than a simple
calculation would imply because big employers often divvy up their
business regionally among different insurers.
Another area of concern, the people said, is the market for
individual insurance plans, the coverage sold on the exchanges that
are at the heart of the Obama administration's signature health
law. Anthem is a major player in individual markets in 14 states.
Cigna has a smaller presence but is participating in seven
Affordable Care Act exchanges this year and said it plans to expand
into new states in 2017.
Anthem Chief Executive Joseph R. Swedish said in congressional
testimony last year that "there is now and will continue to be
robust competition" in the individual insurance markets.
Justice officials also expressed concerns about the heft that a
merged Anthem-Cigna would carry with health-care providers, the
people said. Hospital and doctor groups have strongly opposed the
deal, arguing that bulked-up insurers would have too much power to
force lower reimbursement rates.
Anthem has said the deal will help it work more closely with
health-care providers.
The companies' 11-month engagement has been rocky, with their
respective officials privately sparring on a number of fronts,
including the strategy for securing antitrust clearance, the
Journal reported last month. The discord could lengthen the odds of
receiving regulatory approvals, which are typically tougher to get
if both parties aren't in sync.
Investors are less optimistic on the prospects for Anthem's deal
than for Aetna's. Shares of Cigna have hovered about 35% below the
value of Anthem's cash-and-stock offer, versus a roughly 20% gap
between Humana shares and the terms of its sale to Aetna.
Both mergers are in front of an antitrust enforcement regime
that has shown a willingness to block rivals from combining in
industries it views as being already concentrated. In a recent
speech, Bill Baer, the acting associate attorney general, said such
mergers "can give companies far too much power over the markets in
which they operate, threatening the principles of freedom and
fairness that undergird our economy."
Mr. Baer is among the officials scheduled to meet this week with
Anthem and Cigna, according to people familiar with the matter and
the correspondence review by the Journal.
The government recently won a court ruling that blocked the
proposed combination of office superstores Staples Inc. and Office
Depot Inc., while Halliburton Co. abandoned its takeover of
oil-field-services rival Baker Hughes Inc. under pressure from
antitrust officials.
Write to Liz Hoffman at liz.hoffman@wsj.com, Brent Kendall at
brent.kendall@wsj.com and Anna Wilde Mathews at
anna.mathews@wsj.com
(END) Dow Jones Newswires
June 19, 2016 22:35 ET (02:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
UnitedHealth (NYSE:UNH)
Historical Stock Chart
From Mar 2024 to Apr 2024
UnitedHealth (NYSE:UNH)
Historical Stock Chart
From Apr 2023 to Apr 2024
