January 11, 2016
By Diane Bartz
WASHINGTON (Reuters) – About 15 state attorneys general have joined the Justice Department’s probe of two big insurance mergers, according to people familiar with the matter, increasing the scrutiny on proposed deals that would reduce the number of nationwide health insurers to three from five.
The formation of a large group to scrutinize Aetna Inc’s plan to buy Humana Inc and Anthem Inc’s bid for Cigna Corp complicate what is already expected to be a tough and lengthy review by federal antitrust enforcers.
Connecticut, Florida, Iowa, Massachusetts and Tennessee are among the states that have joined forces to investigate the proposed deals, according to sources close to the states, who spoke to Reuters over recent days. Antitrust probes are designed to determine if a merger would lead to higher prices or otherwise hurt consumers.
The other states participating in the roughly 15-member group could not be learned. The sources asked not to be named because the investigation is not public.
The presence of a large number of attorneys general joining a Justice Department probe underscores the hurdles that both proposed combinations face in winning U.S. regulatory clearance.
Democratic presidential candidate Hillary Clinton, several lawmakers and the American Medical Association, a leading physicians group, have said they feared the pending acquisitions would hurt consumers by leading to higher insurance premiums or limited access to healthcare providers.
While it is up to the Justice Department to ultimately decide whether to file a lawsuit to stop a merger, states provide data to the department on how the mergers would affect their jurisdictions and conduct joint calls to gather data from the companies, as well as critics and supporters of the deals.
One of the most controversial deals last year, the proposed acquisition of Time Warner Cable by Comcast, attracted about two dozen state attorneys general who joined the federal antitrust review. Comcast abandoned the plan in the face of regulatory opposition.
The chief executive of Anthem, Joseph Swedish, said in a phone interview that the decision of the state attorneys general to join with the Justice Department was “a good thing.”
“The states created this path with the DOJ (Justice Department) to promote education, engagement. They develop a lot of insights so that when the DOJ does rule, our work with all of these states is probably enhanced quite a bit because we are not starting from scratch,” he said.
Aetna, separately, voiced confidence in the process. “We are confident that our transaction will receive a fair, thorough and fact-based review from the Department of Justice and the states,” it said in a statement.
Humana declined to comment, while Cigna did not immediately respond to a request for comment.
Anthem announced in July it would buy Cigna for about $54.2 billion to create the largest U.S. health insurer by membership. The announcement came weeks after Aetna struck a $37 billion agreement to buy Humana.
Healthcare insurers say that becoming bigger will allow them to squeeze out administrative costs, negotiate with doctors and hospitals and push down the soaring costs of some drugs.
But the American Medical Association estimates that 41 percent of U.S. metropolitan areas already have a single health insurer with a commercial market share of 50 percent or more. It believes the decrease of nationwide health insurers to three from five would make more regions anticompetitive.
The American Antitrust Institute, in a letter to the Justice Department on Monday, said the deals would “substantially lessen competition in numerous health insurance markets.”
“The AAI recommends that the DOJ ‘just say no’ to the two deals that would fundamentally restructure the nation’s health insurance markets and create further incentives for ‘reactive’ consolidation in the healthcare supply chain,” the group said in the letter.
(Reporting by Diane Bartz; Additional reporting by Caroline Humer; Editing by Soyoung Kim and Leslie Adler)
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