The Department of Justice and multiple state Attorneys General have privately expressed grave concerns about Anthem’s proposed acquisition of Cigna, and don’t believe that the merging companies can come up with remedies that will adequately protect consumers and restore competition in health insurance markets.
The Wall Street Journal recently reported that representatives of Anthem and Cigna met with staff members from the Department of Justice and representatives from over 12 state Attorneys General to discuss the mergers. Staffers said they were wary of the merger and highly doubted that Anthem and Cigna could offer solutions to anticompetitive problems. Justice Department officials outlined key insurance markets where they thought the merger would harm competition, one of their major concerns being national employer markets. Furthermore, staff worried about the power that a combined Anthem-Cigna would have over health-care providers. Physicians and hospital organizations have sharply criticized the mergers and called on state and federal antitrust authorities to block them.
If Anthem is allowed to acquire Cigna, it would become the largest health insurer in the United States, with over 54 million members and $117 billion in annual revenue. Currently the two companies compete for contracts with national companies to administer healthcare benefits. Anthem and Cigna are meeting with other top officials this week, including Acting Associate Attorney General Bill Baer. The Department of Justice has not yet made a decision on whether to block the merger, and it is expected to make a decision by mid July. Investors are not optimistic that the deal will be approved; in recent months antitrust regulators have shown an increased willingness to block mergers in concentrated industries. Health insurance markets already suffer stifled competition due to relatively high concentration.
Additionally, Department of Justice officials are signaling that they are getting tougher on remedy proposals by merging companies. In a recent speech to the American Antitrust Institute, Bill Baer stated that:
"Merging parties often argue that divestitures offered to reduce anticompetitve effects—typically by limiting the increase in concentration in affected markets—should change our view. We don’t see it that way. A remedy should fully and squarely cure the violation. It needs to preserve the status quo ante in affected markets by effectively addressing any and all anticompetitive effects arising from the transaction."
Baer went on to set a high bar for successful remedies, a bar that Anthem and Cigna may find it impossible to overcome.
The DOJ’s investigation of the Anthem-Cigna merger is reaching an important stage. Now, more than ever, it is vital for the Department of Justice, State Attorneys General, and State Insurance Commissioners to hear the concerns of consumer groups, unions, employers, healthcare providers, hospitals, and other concerned parties about many problems that exist with this merger. Even extensive remedies cannot solve a deal this big.