Justice Department, States Sue to Block Health Insurance Mergers

APA is hailing a decision by the U.S. Department of Justice (DOJ) and attorneys general from multiple states and the District of Columbia to block two proposed mergers involving four of the nation’s largest health insurers.

The DOJ and the attorneys general took action on July 21 to block the proposed acquisition by Anthem Inc. of Cigna Corp. and the proposed acquisition by Aetna Inc. of Humana Inc. They alleged that the transactions would increase market concentration and harm competition across the country, reducing from five to three the number of large, national health insurers in the nation.

The department and state attorneys general filed two merger challenges in the U.S. District Court for the District of Columbia. The complaints allege that the two mergers—valued at $54 billion and $37 billion—would harm seniors, workers, employers, physicians, and other health care providers by limiting price competition, reducing benefits, decreasing incentives to provide innovative wellness programs, and lowering the quality of care.

“The decision by the DOJ is a sign that the administration is standing with patients and against anti-competitive mergers that threaten patient choice,” said APA President Maria A. Oquendo, M.D. “We applaud this decision and will continue to offer APA’s help in ensuring protection for our patients.”

APA has worked to educate DOJ about the dangers of the proposed mergers, arguing that they would be detrimental to health care generally, but could especially be harmful to patients with mental illness because the mergers would diminish competition in setting rates and determining conditions of psychiatrist participation in health networks. Also, existing violations of the federal Mental Health Parity and Addiction Equity Act could be exacerbated because patients would have fewer choices among insurance providers.

“We welcome the department’s ruling and are grateful to the administration for hearing the voice of APA and others who believe these mergers would seriously harm the competitive nature of our health care system,” said APA CEO and Medical Director Saul Levin, M.D., M.P.A. “We will continue to work to educate DOJ, the administration, and Congress so that the parity law is enforced and our patients have a wide choice of insurance carriers.”

In a September 9, 2015, letter to U.S. Attorney General William Baer, Levin explained that the proposed Anthem-Cigna and Aetna-Humana mergers “will functionally leave the vast majority of health care administration in the United States to three major insurers, thereby eliminating consumer choice and encouraging insurers to raise prices and reduce quality of care in most markets.”

Levin also outlined several ways in which the proposed mergers and resulting diminished market competition could especially harm patients with mental illness and substance use disorders: maintenance of inadequate provider networks, control of the supply of psychiatrists to plan beneficiaries, artificial limitation of services through denial of claims, and diminished standard of psychiatric care.

“The exercise of market power against physicians by health plans can occur in ways other than through the imposition of lower reimbursement rates,” Levin wrote. “For example, the development and/or execution of strictly tailored medical necessity criteria, quality initiatives, and admission procedures, among others, could be adversely impacted by the exercise of monopsony power. This is of particular concern to psychiatrists.

“Non-price terms and conditions should also be considered in merger analysis because they can result in substantial reductions in quality, efficiency, and/or reimbursement below competitive levels,” Levin stated in the letter. “Even if the antitrust agencies believe that physicians may have some ability to resist anticompetitive reductions in reimbursement, it may be that physicians have less or no ability to resist the imposition of anticompetitive terms and conditions following a health plan merger that would adversely affect quality, efficiency, and appropriate patient access to stated benefits.”

The letter was followed by a meeting between the APA administration and the DOJ on November 23, 2015, to further discuss the ramifications of the proposed mergers and their effects on patients with mental illness and substance use disorders.

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, including Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania, and Virginia, and the District of Columbia joined the department’s challenge of Aetna’s $37 billion acquisition of Humana.

In a statement on its website announcing the decision, the DOJ said the proposed merger of Anthem and Cigna would substantially reduce competition for millions of consumers who receive commercial health insurance coverage from national employers throughout the United States. According to the agency, consumers receiving insurance through large-group employers in at least 35 metropolitan areas, including Denver, Indianapolis, Los Angeles, New York, and San Francisco, and from public exchanges created by the Affordable Care Act in Denver and St. Louis would be most affected. The complaint also alleges that the elimination of Cigna threatens competition among commercial insurers for the purchase of health care services from hospitals, physicians, and other health care providers. The merger would eliminate substantial head-to-head competition in all these markets and remove the independent competitive force of Cigna, which has been a leader in the industry’s transition to value-based care, according to the DOJ.

Further, the DOJ noted that the merger of Aetna and Humana would substantially reduce Medicare Advantage competition in more than 350 counties in 21 states, affecting more than 1.5 million Medicare Advantage customers in those counties. (Before seeking to acquire Humana, Aetna had pursued aggressive expansion in Medicare Advantage, DOJ noted.) Aetna, the nation’s fourth-largest Medicare Advantage insurer by membership, has nearly doubled its Medicare Advantage footprint over the past four years. According to the DOJ, Humana is the nation’s second-largest Medicare Advantage insurer by membership.

The DOJ also said Aetna’s purchase of Humana would substantially reduce competition to sell commercial health insurance to individuals and families on the public exchanges in 17 counties in Florida, Georgia, and Missouri, affecting more than 700,000 people in those counties.  

“Competitive insurance markets are essential to providing Americans the affordable and high-quality health care they deserve,” said Attorney General Loretta E. Lynch in a statement. “These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies.  Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better healthcare for all Americans.” ■

APA’s 2015 letter to the DOJ can be accessed here. The DOJ announcement is available here.