Key Points in the Anthem-Cigna, Aetna-Humana Antitrust Lawsuits

The outcome of the Anthem-Cigna and Aetna-Humana merger cases would change the health insurance landscape by making the “big five” insurers into the “big three.” The U.S. Justice Department doesn’t like the idea, and filed antitrust suits against both back in July.

Here are some of the key points of the Anthem-Cigna trial.

  • Apparently, Cigna and Anthem don’t quite trust each other. The two accused each other of violating the terms of their proposed merger, and that’s one of the issues the government brought up in filing an antitrust lawsuit. At one point, Anthem executives tried to move forward unilaterally since Cigna ceased cooperating with them on various deal-related issues. Isn’t that sort of like doing marriage counseling solo? Even presiding Judge Jackson was stumped. “How do you work on integration without talking to the person you’re integrating with?” she asked. Meanwhile, Cigna officials are uneasy about Anthem’s postmerger plans for the company that would be created in the merger.
  • Morgan Kendrick, Anthem’s president of national accounts, testified that the plan’s $48 billion proposed merger with Cigna will not undermine competition. That’s because, Kendrick said, the merger will allow the new company to compete against plans that are part of the Blue Cross and Blue Shield Association. Kendrick pointed out that Anthem is now part of the Blues association and therefore currently cannot compete against its sister plans. Anthem’s economics expert, Lona Fowdur, also testified that the merger would not adversely affect competition, pointing to the clout of regional insurers and the tendency of employers to split their business among different health plans.

Here are some highlights from the Aetna-Humana case:

  • The Justice Department accused Aetna officials of pulling out of ACA exchanges in three states because Aetna officials believed that their presence in those exchanges would become an issue in the government’s antitrust lawsuit against the two companies.
  • Aetna CEO Mark Bertolini has been quite a presence, even before he took the stand. He received two letters from Senate Democrats asking him to detail why the health insurer has exited Obamacare exchanges.
  • Humana is one of the largest Medicare Advantage (MA) providers and Justice Department lawyers argued that the merger would be bad for MA beneficiaries. Aetna also offers MA plans. Justice Department lawyer Craig Conrath pointed out that the competition between the two helps improve quality and control costs. That would be lost in 350 counties where the insurers now compete head-to-head. Humana owns 18% of the MA market. Only UnitedHealthcare has a bigger presence, at 21%. Aetna has 7% of the market.
  • John Molina, the CFO of Molina Healthcare, faced intense questioning from Justice Department lawyers concerning the merger. Aetna and Human said they would sell $117 million of its assets to Molina. Those assets would bring about 290,000 Medicare beneficiaries in 21 states into the Molina fold. The move would also broaden Molina’s market reach, as the company is now primarily a managed Medicaid supplier. In order to quell the Justice Department’s concerns about the deal decreasing competition, the merging parties agreed to sell off parts of the new company where there is overlap to a third company—Molina, in this case.