Explainer: Why the first mega health insurer deal like the possible Cigna/Humana merger failed

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Signage for Humana Inc.  described in a health facility in Queens, New York City

WASHINGTON, Nov 30 (Reuters) – U.S. health insurers Cigna ( CI.N ) and Humana ( HUM.N ) are in talks to merge, a potential deal likely to face aggressive scrutiny from of the US Justice Department (DOJ) if the history of antitrust Similar-sized deals is any indication. The deal could exceed $60 billion in value.

The DOJ in 2017 successfully stopped Anthem, now Elevance Health ( ELV.N ), from buying Cigna for $54 billion, and thwarted Aetna’s plan to buy rival Humana for $34 billion. Here’s a look at what happened with the deals first announced in 2015.

WHAT IS THE RATIONALE FOR THE PROPOSED AGREEMENT?

Aetna, Humana, Anthem and Cigna cited the Affordable Care Act, known as Obamacare, which Congress passed in 2010 to expand access to affordable health insurance. They say aspects of the new law mean their industry will have to consolidate to meet the costs of expanding coverage.

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WHAT DOES THE JUSTICE DEPARTMENT SAY ABOUT HIS COMPLAINTS?

In each of the two complaints filed in federal court in Washington in 2016, the Justice Department noted a different deal and the unusual merger planned for the industry. It asked federal judges to order each transaction halted.

The Justice Department argued that Anthem’s deal for Cigna would mean “higher prices and reduced benefits” for consumers, including large national employers who pay health insurers to cover their employees. worker. The government’s complaint also cited Cigna as an innovator in finding ways to lower medical costs. “Without the merger, Cigna expects to double in size in the next seven to eight years,” it said in its complaint.

The department’s argument against Aetna’s deal to buy Humana focused on Medicare Advantage, which is federal Medicare coverage provided by private health insurers. The government said the merger would end competition for Medicare Advantage business between the two. “Competition between Humana and Aetna has led to lower premiums, more benefits, better provider networks, and better coordination of care,” the government said in its complaint.

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TWO JUDGES, TWO RULING FOR THE GOVERNMENT

In January 2017, just days into the Trump administration, Judge John Bates of the US District Court for the District of Columbia said that Aetna’s proposed deal with rival Humana was illegal because it would “reduce competition in individual sales Medicare Advantage plans in 364 counties identified in the complaint and the sale of individual commercial insurance on public exchanges in three Florida counties.”

In February 2017, Judge Amy Berman Jackson ordered Anthem’s deal for Cigna to be halted, agreeing with the government’s assessment that it would reduce competition in an already concentrated health insurance market, especially among large national employers.

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Anthem fought back, and an appeals court upheld the decision to block the deal in April 2017. Incoming Supreme Court Justice Brett Kavanaugh dissented, saying an Anthem/Cigna merger would require more high fees to manage accounts but that is offset by better negotiations. rates paid to providers.

IS THE DOJ TIME?

No. The Biden administration is fighting a plan by UnitedHealth N>, the largest US health insurer, to buy Change Healthcare for $8 billion, arguing that it would give UnitedHealth access to data on its competitors and ultimately push the cost of health care.

The DOJ lost in 2022. The judge said the efforts made by the companies to address antitrust concerns were sufficient.