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Justice department files lawsuits to block health insurance mergers

Anthem trying to buy Cigna and Aetna wants to purchase Humana but regulators argue deals would lessen competition and drive up healthcare costs

The Obama administration filed two separate lawsuits in hopes of blocking further mergers within the US health insurance market on Thursday. The suits, filed by the US Department of Justice, seek to block Anthem from purchasing Cigna and Aetna from purchasing Humana. Regulators argue the deals would lessen competition and drive up healthcare costs.

By reducing competition, this proposed merger [between Anthem and Cigna] has the potential to significantly increase the merged firms power in the marketplace, to the detriment of consumers, Eric Schneiderman, attorney general in New York, said in a statement. New York, along with 10 other states and the District of Columbia, has joined the federal complaint. Employers will be left with fewer choices, and ultimately consumers could be saddled with higher premium costs, reduced access to providers, and lower-quality care.

Along with UnitedHealth Group, the four insurers form what the US regulators refer to as the Big Five the five national health insurers. If the mergers were to go through, the number of national health insurers would be reduced to three. When they first announced their mergers a year ago, the health insurers argued that they would be able to lower their prices by expanding their reach. The regulators fear that prices might go up due to reduced competition in several markets.

According to the complaint, the $54bn Anthem-Cigna merger alone would reduce competition for large-group employer plans in 35 local markets, including New York City, in which Anthem does business.

In light of the DoJs decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all, Cigna said in a statement on Thursday, noting that it is evaluating its options.

Anthem described the lawsuit as as unfortunate and misguided step backward for access to affordable healthcare for America.

Eight states signed on to the lawsuit seeking to block the $37bn Aetna-Humana merger. The lawsuit alleges that the merger would reduce Medicare Advantage competition in 21 states, affecting more than 1.5 million Medicare Advantage customers.

In a joint statement, Aetna and Humana argued that their merger would enable them to expand their Medicare offerings to new regions and that these offerings will be of greater quality and cost less.

The facts do not support the basis for DoJ action, they said in a statement, arguing that the new company would only serve 8% of total Medicare beneficiaries.

These mergers may increase profits for Aetna and Anthem at the expense of consumers and employers, who provide health coverage, said the US attorney general, Loretta Lynch.

If the Big Five were to become the Big Three, not only the bank accounts of the American people would suffer but also the American people themselves, she argued.

Barack Obama has also taken issue with limited competition in the health insurance market. Earlier this month, he published an article in the Journal of the American Medical Association noting that the US government could increase the competition in the marketplace by creating a government-run or public health insurance option.

More can and should be done to enhance competition in the Marketplaces, Obama wrote. Public programs like Medicare often deliver care more cost effectively by curtailing administrative overhead and securing better prices from providers. The public plan didnt make it into the final legislation. Now, based on experience with the Affordable Care Act, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.

Read more: https://www.theguardian.com/business/2016/jul/21/justice-lawsuit-health-insurance-merger-cigna-aetna