Seven Democratic U.S. senators—including Elizabeth Warren of Massachusetts and Richard Blumenthal of Connecticut—are urging the U.S. Department of Justice to block the pending health insurance mega-mergers in one of the strongest stances to date against the deals.
Their opposition sends the message that they were not convinced by the testimony of Aetna CEO Mark Bertolini and Anthem CEO Joseph Swedish last year, and it builds even more uncertainty around the federal government's final decisions. The two insurance executives told senators this past September that their respective transactions—Aetna's $37 billion takeover of Humana and Anthem's $53 billion acquisition of Cigna Corp.—would not negatively impact competition.
In a letter to Renata Hesse, the principal deputy assistant attorney general for the Department of Justice's antitrust division, the Democratic senators wrote that the mergers would have a “detrimental impact” on the healthcare system. The Department of Justice could make its final determination on the deals as soon as next month.
“Highly concentrated markets rarely benefit consumers, and we believe that merging four of the five largest national health insurers will likely increase premium prices and healthcare costs to consumers and businesses; diminish competition and choice; and decrease access to quality healthcare,” the senators' letter said.
In addition to Warren and Blumenthal, the other signatories were Sherrod Brown of Ohio, Dianne Feinstein of California, Al Franken of Minnesota, Mazie Hirono of Hawaii and Edward Markey of Massachusetts.
Warren, a consumer advocate and rumored vice presidential contender for presumptive Democratic presidential nominee Hillary Clinton, has not been shy to criticize banks and large corporations. Blumenthal, who was highly skeptical of the arguments presented last fall by Bertolini and Swedish, also has a history as Connecticut's attorney general of challenging mergers.
During last year's Senate subcommittee hearing on the health insurance deals, Franken asked Bertolini and Swedish if their companies would pass along the billions of dollars in proposed savings from the mergers to their consumers in the form of lower premiums. However, both CEOs did not immediately give direct responses.
In addition to concerns over cost savings, the letter says Aetna's transaction will significantly consolidate the Medicare Advantage market, and Anthem's deal will create problems with the Blue Cross and Blue Shield and non-Blue employer markets.
“These senators represent a sizable share of the privately insured population in the U.S.,” Leemore Dafny, a health economist at Northwestern University who appeared before the Senate last fall, said in an email. Her work also was cited in the senators' letter. “I would expect DOJ to consider their diligent and well-argued letter when making final decisions, and potentially make use of it in court battles, should one or more ensue,” Dafny said.
Wall Street analysts have expressed more confidence the Aetna-Humana merger will get federal approval if the companies agree to divest certain health plans. There's been a growing sentiment, according to many industry sources, that the Department of Justice may try to block Anthem's deal because the insurer won't be able to solve the competitive issues with self-insured employer accounts.
“We need them as thriving, independent competitors,” Blumenthal told reporters Wednesday. “Competition is vital.”
The Obama administration's Department of Justice has become more aggressive in attempting to block massive mergers that are viewed as harmful to consumers and competition. Recently scuttled transactions include those between oil services giants Halliburton Co. and Baker Hughes, cable conglomerates Comcast Corp. and Time Warner Cable and mobile communications companies AT&T and T-Mobile.
Bill Baer, a top antitrust official at the Department of Justice who will ultimately make the final call, reinforced the agency's broader merger concerns at an antitrust conference earlier this month.
In response to the senators' letter, Aetna spokesman T.J. Crawford said, “We believe a combined company is in the best interests of consumers. We continue to cooperate with the Department of Justice on its thorough review of the transaction.”
Anthem spokeswoman Jill Becher emailed a statement that said Anthem is having a “productive, ongoing dialogue” with federal and state regulators. “We will continue to work closely with all members of Congress to answer their questions,” the statement reads. “Together, Anthem and Cigna has limited geographical and product segment overlap.”
Both companies still expect their respective deals will be completed in the second half of this year.