American Antitrust Institute Comes Out Against Health Insurance Mergers

January 14, 2016

 

Yesterday, the American Antitrust Institute, an independent and nonprofit education, research and advocacy organization, urged the Department of Justice to reject the proposed mergers between Anthem-Cigna and Aetna-Humana. The AAI has opposed other mergers, including the US Airways-American Airlines merger and the proposed combination of Anheuser-Busch InBev and SABMiller. The fifteen page letter, written by Professor Thomas Greaney of the Saint Louis University School of Law and President Diana Moss of the American Antitrust Institute, states that these acquisitions will likely reduce competition and harm consumers, and that developing remedies that would protect consumers from these effects would be very difficult.

 

The AAI observes that if these mergers proceed, the number of major health insurance companies in the U.S. will be reduced from five to three, which will have a substantial impact on local markets within each state. Such massive health insurance consolidation will further greatly reduce competition and consumer choice in providers, in both metropolitan areas and rural counties. The AAI then notes that over the past ten to fifteen years, increased consolidation throughout our healthcare supply chain has been gradually eliminating competition making health care markets more fragile and less able to withstand outside shocks. Further insurance consolidation will lead to higher premiums for consumers, reduced innovation and quality of care, and increased barriers to competitive entry. It may also reverse the consumer benefits of the Affordable Care Act, which “relies on competitive bargaining between payers and providers and rivalry within each sector to drive price and quality to levels that best serve the public.”

 

Most importantly, the AAI opposes these mergers, because any proposed remedies are likely ineffective to completely restore competition. Frequently, the DOJ has settled challenges to health insurance mergers by requiring divestiture of plans in markets where the merger increases concentration beyond certain thresholds. However, the AAI argues that such remedies will not work in the cases of Anthem-Cigna and Aetna-Humana. Crafting solutions that completely restore competition is harder than previously thought. Additionally, merger remedies have to fully restore competition ended by the merger, and in the health insurance market this will be very difficult. And last but certainly not least, divestiture requires that enforcers and the judiciary be able to closely monitor compliance. The AAI states that “massive-scale divestitures under market conditions beset with uncertainties are likely to be so impractical as to render a remedy involving the proposed mergers incapable of fully restoring competition.”

 

The AAI concludes that DOJ should “Just say no” to these mergers. This announcement is an additional sign that organizations are starting to put pressure on these mergers and mobilize in opposition to them. Fifteen state attorneys general have joined the Justice Department’s probe of the two proposed acquisitions, among them Connecticut, Florida, Massachusetts, Iowa, and Tennessee. With all these parties focusing their attention on the mergers, the investigations will most likely be lengthy, tough, and thorough.

 

 

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