The Justice Department says the proposed mergers violate anti-trust laws and would lead to higher premium and health care costs for Americans.
National Public Radio reports that U.S. Attorney General Loretta Lynch explained the decision at a press conference: “If allowed to proceed, these mergers would fundamentally reshape the health insurance industry. They would leave much of the multi-billion dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care.”
The lawsuit was filed against Anthem Inc’s proposed purchase of Cigna Corp and Aetna Inc’s planned acquisition of Humana Inc. The multi-billion dollar deal would basically recreate the health care industry, reducing the choices of health care providers from four large companies to just three.
“Two of the largest and fastest-growing providers of Medicare Advantage plans, which millions of seniors rely on for crucial medical coverage, would combine into just one. And competition would be substantially reduced for hundreds of thousands of families and individuals who buy insurance on the public exchanges established under the Affordable Care Act,” said Lynch.
Bloomberg says that while it has been suggested that the companies may offer to sell off some of their assets to gain approval, it is doubtful that move would sway anti-trust officials.
It is understood that a final decision on whether or not to go through with the lawsuits could come this week or next week, but regardless of when it happens, the companies will move to settle the lawsuits probably before they are filed.
The news of the possible lawsuits caused stock prices with all four companies to drop. Humana dropped 3.9 percent to $153.38 at the close in New York and Cigna fell 2.1 percent to $130.30. Anthem lost 2.2 percent to $132.06, and Aetna slid 2.7 percent to $115.15.
Lynch has assured the American people that the Justice Department would protect their interests. “We will not hesitate to intervene. We will not shy away from complex cases.”
Reuters is reporting that Aetna and Anthem both argue that their proposed purchases will do just the opposite of what the Justice Department is claiming. They say the mergers will actually help to reduce health care costs and give the insurance companies greater leverage in negotiating prices with hospitals and doctors.
Both companies said on Thursday they plan “to vigorously defend the companies’ pending merger,” which is worth $33 billion. Aetna Chief Executive Mark Bertolini says they will not give up, and if necessary, they will take it to court. Reuters quotes him as saying, “We’ll go all the way we need to make this happen.”
The majority of individuals, large companies, agencies on aging and others are against the proposed mergers. The American economy relies on competitiveness in business to keep prices at a reasonable level, and the proposed mergers could interfere with that essential process as it exists in the health insurance industry.
