Courts Block Two Proposed Giant Health Insurer Mergers

Two rulings by the District Court for the District of Columbia have blocked the Aetna-Humana and Cigna-Anthem mergers.

On January 27 Judge John D. Bates ruled in favor of the U.S. Justice Department in a suit it had filed to block the Aetna-Humana merger. The Department of Justice (DOJ) had argued that it would substantially reduce competition in the Medicare Advantage market in more than 350 counties in 21 states, affecting more than 1.5 million Medicare Advantage customers in those counties.

Twelve days later, Judge Amy Berman Jackson ruled against the Cigna-Anthem merger, saying it would have worsened an already highly concentrated market and likely lead to increased prices. The DOJ had also filed suit to block the merger of Anthem and Cigna.

The Anthem-Cigna merger was proposed in July 2015; Aetna and Humana entered into an agreement that same month. The DOJ’s suit to block both mergers was filed in July 2016.

The DOJ noted that before seeking to acquire Humana, Aetna had pursued aggressive expansion in Medicare Advantage, doubling its Medicare Advantage footprint over the past four years. The DOJ also argued that 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.

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. The department said 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 (Psychiatric News, August 19, 2016).

The courts agreed. 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.

APA leaders hailed the court decisions. “The trend toward consolidation in the insurance market is a troubling one that threatens patient choice, which is critical in our health care system,” said APA President Maria A. Oquendo, M.D., Ph.D. “We are pleased that the court sided with the Justice Department and agreed that these mergers would reduce competition and limit patients’ coverage options.”

APA CEO and Medical Director Saul Levin, M.D., M.P.A., concurred. “We applaud these two rulings, which preserve competition in the health insurance market and prevent insurers from acquiring unprecedented market power,” Levin said. “APA will continue to advocate on behalf of patients and physicians to foster more competitive health insurance markets.”

At press time, Aetna and Humana announced that they would not appeal the decision.

Anthem executive Joseph Swedish indicated in a statement it was likely the company would appeal. “If not overturned, the consequences of the decision are far reaching and will hurt American consumers by limiting their access to high-quality, affordable care, slowing the industry’s shift to value-based care and improved outcomes for patients, and restricting innovation, which is critical to meeting the evolving needs of health care consumers,” he said.

But on February 14 Cigna announced it would terminate the proposed merger agreement with Anthem. In a statement on the Cigna website, the company said: “Cigna believes that the transaction cannot and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna’s shareholders. To effect this termination, Cigna has filed suit against Anthem in the Delaware Court of Chancery. The suit seeks declaratory judgment that Cigna has lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date. The complaint seeks payment by Anthem of the $1.85 billion reverse termination fee contemplated in the merger agreement, as well as additional damages in an amount exceeding $13 billion. These additional damages include the amount of premium that Cigna shareholders did not realize as a result of the failed merger process.” ■