Obama Administration Blocks Health Insurance Mergers

The Obama administration has filed two separate lawsuits with the intention of blocking mergers within the US health insurance market.

Filed by the US Department of Justice, the legal action is intended to block Anthem from purchasing Cigna and Aetna from acquiring Humana; thus hindering insurance diversity in this critical public area.

Eric Schneiderman, attorney general in New York, explained the ethos behind this decision from government.

“By reducing competition, this proposed merger [between Anthem and Cigna] has the potential to significantly increase the merged firm’s power in the marketplace, to the detriment of consumers. Employers will be left with fewer choices, and ultimately consumers could be saddled with higher premium costs, reduced access to providers, and lower-quality care.”

The four insurers affected by the legal action represent 80% of the so-called ‘Big Five’ national health insurers in the United States.

Should the mergeres go through unencumbered by legal action then the number of national health insurers would be reduced to just three.

Regulators are concerned that drug prices could escalate in such a reduced competition climate.

The Anthem-Cigna merger alone is valued at $54 billion, and could impact upon 35 local markets in the States.

Cigna has already responded to the legal action taken by the federal government, indicating that it will have a significant influence on the potential merger.

“In light of the DoJ’s decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all,” Cigna commented in a statement.

Anthem was also predictably critical of the Obama administration decision, describing it as an “unfortunate and misguided step backward for access to affordable healthcare for America”.

Meanwhile, eight states within the US have signed on to the lawsuit which seeks to block the merger between Aetna and Humana.

Although slightly smaller than the mooted Anthem-Cigna deal, it is nonetheless a massive healthcare project, valued at around $37 billion.

The lawsuit alleges that the merger would reduce Medicare Advantage competition in 21 states, affecting more than 1.5 million Medicare Advantage customers.

Responding to the decision of the federal government, Aetna and Humana proferred the opinion that the merger would in fact enable them to expand Medicare offerings to new regions, and that such services could be delivered at a more affordable rate.

“The facts do not support the basis for DoJ action,” the companies asserted in a joint statement, arguing that the new company would only serve 8% of total Medicare beneficiaries.

President Obama has persistently addressed what he believes to be limited competition in the health insurance market.

An article in the Journal of the American medical Association was attributed to Obama earlier this month, outlining his view on what is considered to be an important issue in the United States.

“More can and should be done to enhance competition in the Marketplaces. Public programs like Medicare often deliver care more cost effectively by curtailing administrative overhead and securing better prices from providers. The public plan didn’t make it into the final legislation. Now, based on experience with the Affordable Care Act, I think Congress should revisit a public plan to compete alongside private insurers in areas of the country where competition is limited.”

 

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