AMA warns of drastically reduced competition if mergers allowed

More competition is needed in the health insurance markets, a premise supporting the efforts to block the merger of four of the nation’s biggest health insurance companies, according to an analysis by the American Medical Association (AMA). Anthem’s acquisition of Cigna and the merger of Aetna and Humana would essentially eliminate competition in 24 states. The Department of Justice filed suit in July to challenge the two mergers (see DOJ lawsuit steps in between Aetna-Humana and Anthem-Cigna mergers, Health Law Daily, July 21, 2016).

Competition in health insurance markets

The AMA assessed the anticompetitive impact of the potential mergers in “Competition in Health Insurance: A Comprehensive Study of U.S. Markets,” which is based on 2014 data captured from commercial enrollment in fully and self-insured health maintenance organizations (HMOs), preferred provider organizations (PPOs), and point-of-services (POS) plans. The analysis found a significant absence of health insurer competition in 71 percent of the metropolitan areas studied. In 40 percent of the metropolitan areas studied, a single health insurer had at least a 50 percent share of the commercial health insurance market. In 14 states, a single insurer had at least a 50 percent share of the commercial health insurance market.

Specifically, the Anthem-Cigna merger stands to quash competition in 121 metropolitan areas throughout 14 states. Nine of the states are attempting to block the merger, but Indiana, Kentucky, Nevada, Ohio, and Wisconsin have not yet taken a position. The Aetna-Humana merger would shut down competition in 57 metropolitan areas in 15 states. Only four states have acted to block the merger, but Arizona, Indiana, Kansas, Kentucky, Louisiana, Mississippi, Tennessee, Texas, Utah, West Virginia, and Wisconsin have not yet taken a position.

“The AMA analyses show that Anthem-Cigna and Aetna-Humana mergers would significantly compromise market competition in the health insurance industry and threaten health care access, quality and affordability,” said Andrew W. Gurman, M.D., president of the AMA. “With existing competition in health insurance markets already at alarmingly low levels, federal and state antitrust officials have powerful reasons to block harmful mergers and foster a more competitive marketplace that will operate in patients’ best interests.”

Anthem first to respond to merger challenges, government opposes quick trial

Two large insurance mergers–Cigna-Anthem and Aetna-Humana–have been hot topics since the deals were proposed. The latest hurdle, suits filed by the Department of Justice (DOJ), may be a bigger issue than anticipated, as the government argued against Anthem, Inc.’s request for a speedy trial. The DOJ argued that the issues at hand are more complex than other cases, requiring more time than the 88-day scheduling range Anthem requested.

The inevitable lawsuit 

On July 21, 2016, the DOJ filed lawsuits challenging both the Cigna-Anthem merger and the Aetna-Humana merger. Attorney General Loretta Lynch stated that the mergers would eliminate too much competition and, therefore, the motivation for insurers to lower their premiums and offer better benefits. Aetna and Humana both stated they would contest the suit, arguing that the deal would actually improve options for Medicare patients. These companies are two of the four largest Medicare Advantage providers. According to the DOJ, an Anthem-Cigna merger would result in only three insurers with networks that would sufficiently serve the country’s largest employers.

Cigna’s response to the suit was less robust, stating that if the deal closed at all, it would be sometime next year. The company is reviewing the merger agreement, which may require defense of the deal, and analyzing its options. Anthem took the position that the suit was a “step backwards” for consumers, but seemed open to a settlement.  A joint statement from Aetna and Humana suggested that some divestitures could preserve competition, but the government was doubtful.

The American Hospital Association (AHA) and the American Medical Association (AMA) believe that the suit protects consumers, and that fewer coverage options would undermine innovation. The Center for Healthcare Research & Transformation director noted that even if the deals reduced prices insurers pay to providers, consumers may not see any savings. She believes that the suits will be difficult for the companies to win. Failure would be costly for Aetna and Anthem, as the agreements state that Anthem would pay Cigna $1.85 billion and Aetna would pay Humana $1 billion in termination fees.

State responses

States are taking action on the suits as well. Eleven states, plus the District of Columbia, joined the DOJ’s challenge against the Cigna-Anthem merger, while eight states and D.C. joined to fight Aetna-Humana. Other state actions are pending as well, such as the New Hampshire Insurance Department’s is review of the Cigna-Anthem proposal. An AMA analysis found that the  merger would result in control of 64 percent of the state’s insurance market. According to the state, the two proceedings are separate, and the insurance commissioner still has the authority to act in the event that the lawsuit does not succeed. The state department is not yet prepared to hold hearings, and will wait to take action until the lawsuit is resolved.

Speedy trial

Anthem, the only company that has filed an answer in the lawsuits, requested that the judge provide a trial within 88 days, with a decision on the injunction coming within 35 days of the trial’s conclusion. The government strongly opposes such a quick timeline, as the case comes against the largest health care merger ever to be proposed. The DOJ finds that the case is more complex than another recent coal antitrust suit that was quickly resolved, which Anthem relied upon as an example in its answer.