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Feds Sue To Stop Health Insurance Mergers

The Department of Justice on Thursday filed lawsuits to stop health insurer Aetna from buying Louisville-based Humana. The DOJ is also suing to block a similar deal: insurer Anthem has proposed buying Cigna. The deals, Attorney General Loretta Lynch said in a news conference, would reduce competition in the health care market, resulting in higher prices for consumers.

Aetna proposed last summer to buy Humana for $37 billion, while Blue Cross-Blue Shield insurer Anthem moved to acquire Cigna for $48 billion.

Beth Munnich, a health economics assistant professor at the University of Louisville, said there is research to back the DOJ's concerns.

“We have a lot of economic evidence about the relationship between competition and prices," Munnich said. "We know that when there are few insurance companies in a market, there tend to be higher prices, at least historically."

When Aetna's acquisition of Humana was agreed upon last year, Humana's stock was priced at $230.00 per share. Earlier this month, when news broke that the DOJ was seriously questioning the merger, Humana's stock plummeted. At mid-day Thursday, Humana stock reached $168.50 per share, the highest it’s been since early July.

On Thursday -- the same day the DOJ filed suit to block the impending merger -- Humana also announced better-than-expected profits in its Medicare Advantage plans. Principal Deputy Attorney General Bill Baer said that Humana and the other insurers are continuing to profit and the merger would only sweeten the deal for them. He said a merger of this magnitude -- involving four of the five largest insurance companies in the country -- threatens to increase premiums and slow innovation.

“These four are already some of the largest most sophisticated insurance companies in the U.S.," he said. "They are thriving. Our investigation showed that this would harm competition."

Baer said the merger would hurt seniors, employers, the previously uninsured, doctors and hospitals.

He said Humana and Aetna have some of the country's most innovative Medicare Advantage plans. These are private plans that must offer the same level of benefits as government Medicare plans, but also tack on benefits like vision and dental.

The merger would mean seniors would have fewer choices, which the DOJ contends could lead to higher prices, less benefits and lower reimbursement levels for doctors and hospitals.

The Associated Press reports the insurance companies plan to fight the federal suit.

This story has been updated. 

Lisa Gillespie is WFPL's Health and Innovation Reporter.

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