U.S. Suing To Block Aetna-Humana And Anthem-Cigna Mergers

July 22--The U.S. Department of Justice moved Thursday to block sweeping insurance industry acquisitions sought by Aetna Inc. and Anthem Inc., with Attorney General Loretta Lynch criticizing the deals as anti-competitive and being pursued "at the expense of consumers across America."

Anti-trust lawsuits were filed in District of Columbia federal court against both deals. Anthem has proposed to acquire Bloomfield-based Cigna for $54 billion, and Hartford-based Aetna has sought Humana Inc. for $37 billion.

Connecticut is one of the eight states -- in addition to the District of Columbia and the Justice Department -- that are suing to prevent the Anthem-Cigna merger, but it is not involved in the Aetna-Humana lawsuit.

Lynch said she has serious concerns that both deals would create substantially less competition in the health care industry, which would hurt consumers, doctors and hospitals.

"If allowed to proceed, these mergers would fundamentally reshape the health insurance industry," she said. "The mergers may increase the profits of Aetna and Anthem, but at the expense of consumers across America."

Acting Associate Attorney General William Baer said the deals "put at risk the system that Americans rely on to pay for health care."

"They are thriving as independent firms. They do not need the deals to survive, and consumers are entitled to benefit from their continued competition," he said.

Chief Executive Officer Mark Bertolini said in a letter to employees that Aetna will push back against the Department of Justice. He has also planned a town hall-style meeting for employees on Monday.

"We look forward to sharing the facts in court and we will continue to press forward," he said. "In the meantime, our integration planning continues."

Aetna and Cigna responded in sharply different tones. Cigna said the deal may not close at all, while Aetna disputed the government's claims, saying that controlling a larger proportion of the Medicare Advantage market would help, not hurt seniors.

In a statement, Cigna said: "Given the nature of the concerns raised by the DOJ and the overall status of the regulatory process, which under the terms of the merger agreement was led by Anthem, Cigna is currently evaluating its options consistent with its obligations under the agreement.

"In light of the DOJ's decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all."

However, its suitor Anthem said that it is "committed to challenging the DOJ's decision in court." The company called the lawsuit an "unfortunate and misguided step backwards for access to affordable healthcare for America."

Aetna and Humana said in a joint statement that they would fight "to vigorously defend the companies' pending merger." The companies contend that they could create more options for consumers. They have said the acquisitions would lead to better negotiated prices for drugs and medical services with pharmaceutical companies, hospitals and doctor groups, resulting in lower costs to employers, individuals and customers.

"These options will cost less. By making health care more efficient and effective, Aetna and Humana will eliminate waste and decrease costs for members."

The Department of Justice has won 45 anti-trust cases in the last five years, and hasn't lost any. However, sometimes companies are able to restructure the deal and reach a settlement with regulators. Last year, it successfully blocked the purchase of General Electric's appliance division by Electrolux.

News of the lawsuits prompted shares of each company to climb. Aetna shares rose $1.83, or 1.57 percent; Humana shares rose $13.12, or 8.28 percent; Anthem shares rose $3.53, or 2.61 percent; and Cigna shares rose $7.21, or 5.42 percent.

U.S. Sen. Richard Blumenthal, D-Conn., a critic of the two deals, praised the Justice Department action.

"This federal court action thankfully should stop misguided mega-mergers that would kill jobs and raise prices," he said.

The Connecticut Department of Insurance has suspended its review of the Anthem-Cigna merger because of the federal lawsuit. Advocates and some politicians have sharply criticized the review, because Commissioner Katharine Wade used to be a Cigna lobbyist. The state's ethics panel agreed Thursday to continue a review of whether Wade should have recused herself from overseeing the proposed acquisition.

Connecticut did not join the lawsuit against Aetna and Humana because "any direct anti-competitive effects of this merger are unlikely to have a significant impact in Connecticut," state Attorney General George Jepsen said.

Jepsen, however, said his staff determined that the Anthem-Cigna deal would have severe impacts on health care competition in the state, and projected it would both raise premiums and reduce the quality of care.

With both Cigna and Anthem having offices in the state, Jepsen said he hopes they "continue to grow and prosper in Connecticut in the future."

"That being said, no remedy has been proposed by either party that would address the potential harm to competition in Connecticut's healthcare insurance market that this merger would cause, and I believe the law in this case is clear," Jepsen said.

Baer said regulators were worried about how the deals would affect competition in three areas in particular: coverage offered by large employers, insurance sold on the Affordable Care Act's public exchanges and Medicare Advantage plans, which are privately run versions of the government's Medicare program for the elderly.

Aetna and Humana contested that the combined company would cover only 8 percent of traditional Medicare or Medicare Advantage plans. According to the Kaiser Family Foundation, if Aetna acquired Humana with no divestitures in 2016, the combined firm would cover 25 percent of Medicare Advantage customers.

Aetna and Humana said they don't believe selling off Medicare Advantage plans is necessary, but if the government insists, there are already bidders lined up.

"If allowed to proceed, this merger would enhance Aetna's power to profit at the expense of seniors who rely on Medicare Advantage and individuals and families who rely on the public exchanges for affordable health insurance," the lawsuit against Aetna says.

A local opponent to the merger cheered the antitrust action. "The people of Connecticut and the nation now have a major ally in the fight against these mergers," said Frances Padilla, president of Universal Health Care Foundation of Connecticut.

Matthew Katz, chief executive officer at the Connecticut Medical Society, also applauded the Department of Justice's lawsuit, and said that if the insurers merge, the state's doctors were concerned they would have "exclusive or near-exclusive power to dictate price and care delivery to the detriment of patient medical care."

Courant staff writer Kristin Stoller and the Associated Press contributed to this report.

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