Anthem Inc. (Indianapolis IN) said its proposed $48 billion merger with rival health insurer Cigna Corp. (Bloomfield CT) will lower consumer costs and extend coverage to more people, in response to a U.S. lawsuit seeking to block the deal.
Anthem also said the combined carrier would fortify the online insurance exchanges created under the Affordable Care Act at a time when other insurers are withdrawing from them, according to papers filed in federal court in Washington.
Anthem’s “acquisition of Cigna will significantly increase consumers’ access to the exchanges with the combined firm entering into new territories in nine states where the two firms are not currently participating,” according to the filing.
With operations in 14 states, Anthem is the largest member of the Blue Cross and Blue Shield Association. The Justice Department sued to stop the Anthem-Cigna deal on June 22, the same day it also sought to block Aetna Inc.’s (Hartford CT) $37 billion bid for Humana Inc. (Louisville KY), saying the tie-ups will cut the number of major American health insurance companies from five to three, raising costs and reducing competition.
Anthem’s CEO Joseph Swedish (pdf) said that he plans to extend the agreement to buy Cigna to the end of April. The trial, which the company has asked the judge to set for October, is likely to last about four months, he said.
Anthem is the first of the four insurers to respond to the U.S. lawsuits. The company asked U.S. District Judge John D. Bates to fast-track the case, setting the trial in about three months, with a decision about a month later.
Its deal partner, Cigna, said it would review its options under the merger agreement. Aetna and Humana, in a joint filing, said their circumstance is even more pressing than that of Cigna and Anthem because their merger has a contractual “drop dead” date of Dec. 31.
The companies asked Bates for permission to attend any court conference at which trial scheduling is discussed, saying “trial dates in the two cases should be set with both transaction deadlines in mind.”
The cases are U.S. v. Anthem Inc., 16-cv-1493, and U.S. v. Aetna Inc., 16-cv-1494, U.S. District Court, District of Columbia (Washington).
Steve’s Take: It may have taken a while but the lawsuits filed last week by the Department of Justice and state Attorney’s General in federal court challenging the proposed, colossal health-insurance mergers were crucial to the future success of the Affordable Care Act.
As reported by The New York Times, antitrust officials say Aetna’s 37-billion acquisition of Humana and Anthem’s 54 billion-purchase of CIGNA will reduce the number of the largest national health insurance from 5 to 3.
Some, yours truly included, have concluded that to permit the mergers would lead to fewer choices and higher premiums for individuals and employers in places like New York, San Francisco, and Chicago.
Management of Aetna, Humana, Anthem and CIGNA defend these mergers with a unified chorus of hallelujahs, they will produce economies of scale that will lower insurance costs and ultimately result in a far more efficient healthcare system.
As The Times points out, they also claim the mergers will encourage doctors and hospitals to coordinate medical care more effectively. How this will happen, I don’t have a clue.
In taking a macro, highly simplistic view of the two proposed mergers, it seems probable they will in fact drive up prices and reduce benefits. Keep in mind that these players are first and foremost committed and driven to earn a profit and enhance shareholder value.
All told, the four companies sell nearly 980,000, or 61%, of the 1.6 million Medicare Advantage plans purchased in 364 counties around the U.S. All the platitudes about serving a public health purpose aside, the mergers are carefully designed to ultimately increase premiums without the any real risk of losing customers.
They have even tried to argue they can meet the anti-competitive strictures via the divestment of assets, namely customer policies, but those are simply too easy to re-acquire.
The Justice Department is determined to challenge these mergers unless they improve competitive conditions and lower prices for consumers, which was the cornerstone of the Affordable Care Act.
At present, this litigation is nothing but a trial run with the outcome, in my opinion, headed for the Supreme Court. If Mr. Trump is elected in November, you can bet these mergers stand a much better chance of going through than if Ms. Clinton takes office.
It seems to me this boils down to a question of whether corporate profit prevails over consumer choice and we’ll have to wait until November to get a better sense of the likely outcome. After the two conventions, I’ll take the DOJ.