Antitrust Officials Reportedly Preparing to Block Insurance Mega-Mergers

The Department of Justice is reportedly preparing to sue to block two mega-mergers that could transform the health insurance landscape by consolidating the big five insurers into just three companies, according to Bloomberg.

For months, there has been speculation about whether federal antitrust officials would intervene to stop a $54 billion merger between Anthem and Cigna and a $37 billion deal between Aetna and Humana, both announced last summer. The companies have argued that the mergers would benefit consumers and shareholders, but politicians, state regulators and the American Medical Association have raised questions about whether the deals would reduce competition and drive up costs for patients.

“We don’t comment on rumors or speculation, but we’re steadfast in our belief that this deal is good for consumers and the health care system as a whole,” said T.J. Crawford, a spokesman for Aetna. Humana spokesman Alex Kepnes did not immediately respond to voicemail and email messages.

Anthem spokeswoman Jill Becher and Cigna spokesman Matthew Asensio both declined to comment on the Bloomberg report.

The Department of Justice also declined to comment. Bloomberg, citing unnamed people familiar with the matter, reported that the final decision to move forward would likely come this week or next.

Analysts trying to gauge the likelihood that the deals would go through have become increasingly sour on the Anthem-Cigna deal, seeing little chance that it will pass antitrust scrutiny. California’s insurance commissioner wrote a letter to antitrust officials in June raising concerns about that deal.

“Specifically, the enhanced market power of the merged companies will permit them to increase premiums, decrease the quality of care provided to their California members in a number of the state’s regions, and reduce access to crucially needed insurance products,” Dave Jones, the state’s insurance commissioner wrote.

The Missouri Department of Insurance in May found that in some markets, the Aetna-Humana deal would reduce competition for those who rely on Medicare Advantage.

A back-and-forth between state regulators and big insurers is common during mergers. Typically, it results in companies agreeing to sell off assets that regulators deem would result in the concentration of too much market power.

But the potential Department of Justice challenge is significant. Ana Gupte, a senior analyst with Leerink Partners, said she expected Aetna and Humana to countersue the government. Anthem and Cigna also could consider the same move, but she said that deal is not seen has having a good shot of winning and the players could also simply decide to walk away.

The insurance companies have argued that the combined companies would have greater economies of scale and would be able to use their clout to drive better deals with hospitals and physician groups.

“It doesn’t seem to be holding water with this Administration,” Gupte said.

The stocks of all four companies fell on the news Tuesday.