Today, the health insurance industry in the United States is dominated by five large insurers commonly referred to as 'the big five', suggested the Department of Justice. The US government moved to prevent two mega-mergers in the health insurance industry, saying they would sharply reduce competition and harm millions of American consumers.
The Department of Justice sued in the Washington, DC federal district court to block Aetna Inc's $37 billion takeover of Humana Inc., and Anthem Inc's $54 billion merger with Cigna Corp.
‘The United States government moved to prevent two mega-mergers in the health insurance industry, saying they would sharply reduce competition and harm millions of American consumers.’
AdvertisementThe Justice Department said, "These mergers would reshape the industry, eliminating two innovative competitors - Humana and Cigna - at a time when the industry is experimenting with new ways to lower healthcare costs. Other insurers lack the scope and scale to fill this competitive void."
The move comes as heath care and health insurance costs continue to rise significantly faster than overall inflation, and despite the efforts of the administration of President Barack Obama to press down prices and boost competition through the ambitious reforms of the 'Affordable Care Act', or 'Obamacare'.
Aetna's proposed takeover of Humana, announced on July 2, 2015, would join the country's third and fifth-largest health insurance companies, combining 33 million customers.
The government suit focused particularly on their offering of Medicare Advantage, privately managed delivery of the government's Medicare health benefits programs for people over 65.
The government said the two companies compete head to head in about 90% of the US districts where Aetna offers the insurance.
"That competition benefits many of the people who rely on the Medicare Advantage program to help cover their healthcare costs," the Justice Department said.
Anthem, the country's second largest health insurer, proposed its acquisition of number four Cigna three weeks after Aetna's bid for Humana.
The Department of Justice said the two compete head to head in many markets and that by taking over Cigna, the "slow to innovate" Anthem would eliminate the threat from a more agile and effective rival.
"If permitted to proceed, Anthem's purchase of Cigna likely would lead to higher prices and reduced benefits, and would deprive consumers and healthcare providers of the innovation and collaboration necessary to improve care outcomes," the suit said.
Aetna and Humana quickly announced that they would fight the lawsuits.
They said in a joint statement that their merger would not eliminate "robust competition" in Medicare related insurance,
"There is an abundance of choice for seniors, and built-in protections," the said.
Anthem also said it would fight, calling the suit against its merger with Cigna "an unfortunate and misguided step backwards for access to affordable healthcare for America."
Cigna separately warned that the merger would not be completed this year. "The earliest it could close is 2017, if at all."