Nearly everyone in healthcare speculated for the past year about how the U.S. Justice Department would respond to the mega-deals proposed by Aetna and Anthem. Officials were concise and stern as they delivered their answers from a podium last week.
“Aetna's acquisition of Humana and Anthem's acquisition of Cigna may be a convenient shortcut to increased profits for those companies,” said Bill Baer, one of the department's top antitrust officials. “But the antitrust laws make clear that mergers are not lawful when they risk denying consumers the benefits of competition.”
U.S. Attorney General Loretta Lynch said that if the deals were allowed, “not only the bank accounts of the American people would suffer, but also the American people themselves.”
But even if the federal government buries Anthem's $53 billion acquisition and Aetna's $37 billion purchase, the big five health insurers (which also include UnitedHealth Group) are likely to forge new transactions to scale up and improve their position at the bargaining table with consolidating hospitals and health systems.
“It's still a pretty fragmented industry,” Jeff Loo, an equities analyst at Standard & Poor's Global Market Intelligence, said of health insurers. “If the big five remains and if they make a bid for one of the smaller players, I don't think the Department of Justice would have that strong of an argument to stop it.”
Many people maintain that the insatiable appetite to bulk up is a result of healthcare reform, which encourages hospitals, doctors and insurers to create more cohesive systems of care. “There's a lot in the Affordable Care Act for groups to merge,” said Marianne Udow-Phillips, director of the Center for Healthcare Research and Transformation at the University of Michigan.