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DOJ files suit to block two mega-mergers of health plan giants


What will it mean to doctors that the U.S. Department of Justice (DOJ) filed suit July 21 in District Court to block two mergers involving health plan giants?

What will it mean to doctors that the U.S. Department of Justice (DOJ) filed suit July 21 in District Court to block two mergers involving health plan giants?

Both mergers were announced last July, with Anthem, largest of the Blue Cross/Blue Shield plans, acquiring Cigna in a merger valued at $54 billion; and Aetna acquiring Humana in a deal valued at $39 billion. These are four of the five largest insurance plans nationally, with an estimated $86 million covered lives.


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The DOJ said the mergers would increase concentration, harm competition and decrease incentives to innovate, ultimately eroding quality of care.

“Competitive insurance markets are essential to providing Americans the affordable and high-quality healthcare they deserve,” Attorney General Loretta E. Lynch said in announcing the suits. “These mergers would restrict competition for health insurance products sold in markets across the country.”

Both the American Medical Association and the American Hospital Association previously expressed concerns about the mergers in Congressional testimony, and the Physicians Advocacy Institute (PAI), an organization growing out of previous anti-healthcare-merger litigation settled in 2003, endorsed the DOJ’s efforts to block the mergers.

“It will stifle competition,” PAI president Robert Seligson, MBA, MA, says about the proposed mergers. “These huge plans would limit a lot of the negotiation that now goes on between payers and providers, making it much more one-sided.”


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Matthew Katz, executive vice president and CEO of the Connecticut State Medical Society, adds, “you could end up with these goliaths that dictate to providers. It puts more power in for-profit engines that are more focused on level of profit than care delivery.”

Next: Could have several outcomes


The DOJ suit against the four healthcare giants could have several outcomes, sources say, including decisions by the plans to drop the mergers, or vigorously defend them in court, or a  compromise settlement to address DOJ’s concerns, perhaps through divestitures in certain local markets. Medicare Advantage penetration will be a particular focus for the regulators. The legal landscape is also complicated by the involvement of 16 state attorneys general joining the DOJ’s challenges to one or both mergers.

Would Consumers Benefit? It All Depends

Mergers are often promoted for their potential to improve economies of scale and efficiency and thereby improve the quality of services. The insurers have also cited their ability to design new products employing technology to help better-informed consumers stay connected with their doctors.


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But healthcare isn’t like other industries, because insurance companies bargain with providers-who are now also busy consolidating, both with similar providers across regions and with other provider types across the care continuum, says Amanda Starc, PhD, a healthcare economist at the Wharton School of the University of Pennsylvania in Philadelphia.

“You might make the argument that mergers can bring down costs of healthcare, but there is little empirical evidence for that,” she says. “What evidence there is says, ‘it depends’” because while these are large national companies involved in the mergers, in a particular local market they may not be that big. In the past, Starc adds, consolidation of health insurers has led to higher premiums, rather than economies of scale.

Next: Where does the mutual growth end?


For such mergers to produce lower premiums for the consumer, much of that would need to be squeezed from providers, but there is no guarantee that the savings would be passed on to consumers. Particularly in markets where Medicare Advantage penetration is more concentrated among just a few providers, it’s hard to say that it could benefit consumers, she adds.


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In a recent Health Affairs blog post, antitrust expert Thomas L. Greaney, JD ,Co-Director of the Center for Health Law Studies at St. Louis University School of Law cited the “sumo wrestler theory” of mergers and concentration of healthcare insurers and providers: each side feels it has to get bigger in order to match the increasing side of the other.[1] But where does that kind of mutual growth end?


[UPDATE 8.9.2016] Last week, two of the national companies proposing to merge, Aetna and Humana, announced their plans to sell some of their Medicare Advantage assets in 21 states to Molina Healthcare of San Jose, Calif., for an estimated $117 million in order to help preserve robust competition between MA plans in those markets. Both national companies also affirmed their intent to vigorously defend their pending transaction in court.


[1] Greaney T. New Health Care Symposium: Dubious Health Care Merger Justifications-The Sumo Wrestler And ‘Government Made Me Do It’ Defenses. Health Affairs Blog; February 24, 2016. See: http://healthaffairs.org/blog/2016/02/24/dubious-health-care-merger-justifications-the-sumo-wrestler-and-government-made-me-do-it-defenses/

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