It’s been roughly one year since insurers Aetna and Anthem announced their merger deals with Humana and Cigna, respectively. If the mergers are approved by the U.S. Department of Justice (DOJ) the five largest Health Plans in the United States will become three (Aetna, Anthem and UnitedHealth). The deals have faced scrutiny from the DOJ, state regulators and Congress.
While it appears the Aetna-Humana merger is on the path to approval despite some concerns from regulators, the Anthem-Cigna merger is facing notably more pushback from state and federal regulators.
After a series of meetings between representatives from Anthem and Cigna with the DOJ and state attorney general representatives in late June, regulators expressed doubts that the merger will be approved due to concerns over the effect it would have on competition. The State of California Department of Insurance was particularly harsh in its criticism, asserting that the deal would have an anti-competitive effect on the employer market.
After the DOJ meetings and a tumultuous public hearing with Congress, a number of anti-trust regulators have expressed their belief that Anthem and Cigna will not be able to offer adequate fixes to fully satisfy the DOJ. If the merger is approved, Anthem-Cigna would become the largest Health Plan in the United States with over 54 million covered lives.
The Aetna-Humana merger is not without its own issues however based on the reactions of state regulators, it has a greater chance of succeeding than the Anthem-Cigna deal. During the individual state approval process, the state of Missouri issued conditions Aetna had to adhere to before the state would approve. Missouri expressed concerns that the merger would give Aetna-Humana too much control in the state’s Medicare Advantage market and said the providers would need to divest some of their Medicare plans to ensure market competition.
Furthermore, the state of California negotiated terms of approval with Aetna, in which the merged plan gives the California Department of Managed Health Care (DMHC) greater scrutiny over any increases in its premium rates. In response to these criticisms, Aetna is attempting to remedy the issues identified by the state regulators including Aetna’s recently announced plan to divest billions of dollars’ worth of Medicare Advantage assets. By no coincidence, Aetna’s desire to acquire Humana stems largely from Humana’s burgeoning success in the Medicare Advantage field.
Notably, both mergers were personally rejected by California’s top insurance regulator Dave Jones, who stated his belief that the mergers should be blocked by the DOJ. Jones’ opinion to block the Aetna-Humana merger came just three days after the California Department of Managed Health Care approved the merger with negotiated conditions. Despite his potential influence over those who can approve the merger, Jones has no authority to veto the mergers himself.
Anthem and Cigna expect to hear the DOJ’s final decision in mid-July but the prognosis appears bleak. An Aetna spokeswoman stated the company expects the transaction to be completed in the second half of 2016 and accordingly Aetna pushed its merger finalization deadline to December 31, 2016.
As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.
Kirk Reinitz, CPA