Some influential politicians and state medical associations have urged federal regulators to block Aetna’s proposed acquisition of Humana.
Seven U.S. senators recently wrote a letter to Renata Hesse, the principal deputy assistant attorney general in the U.S. Department of Justice’s Antitrust Division, to urge her “to challenge the proposed mergers of Aetna-Humana and Anthem-Cigna.”
The opponents include U.S. Sens. Elizabeth Warren, D-Mass., and Richard Blumenthal, a Democrat from Aetna’s home state of Connecticut. Blumenthal also is a member of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.
Aetna wants to buy Louisville-based Humana for $37 billion. The DoJ is analyzing data to determine whether to let the merger proceed. If regulators believe the deal would materially diminish competition, they could decide to sue to block the transaction.
The regulators’ analysis is especially difficult this year, because the health insurance industry landscape is in flux, as corporate giants Anthem and Cigna also want to merge.
Humana and Aetna have said the combined company would offer more products and services and provide higher quality health care at a lower cost. They have said the merger would cut costs in part because the combined company would have greater leverage to negotiate for prices with providers, which could reduce costs to consumers.
“We believe a combined company is in the best interest of consumers, particularly seniors,” Aetna spokesman T.J. Crawford told Insider Louisville today via email.
Opposition: less competition, higher costs
However, Sens. Warren, Blumenthal and others disagree, telling the DoJ that both mergers “would substantially harm competition,” citing, for example, the Aetna-Prudential merger, after which premiums rose by 7 percent.
“Should these mergers be approved, just three firms would control 91 percent of the national market,” the senators wrote. In addition, they wrote, “competition would be reduced in 126 of 388 metropolitan statistical areas.”
And while the companies say their combined power would allow them to secure better deals, the senators said “the evidence overwhelmingly suggests that few if any cost savings secured by the merging firms through the exercise of market power will be passed on to consumers.”
The senators also wrote that the Aetna-Humana merger “would particularly harm competition in the Medicare Advantage market,” and that forcing the companies to sell portions of their business to preserve post-merger competition usually does not work. “Divestitures designed to restore competition in the health care industry run an especially high risk of failure,” the senators wrote.
The legislators also voiced concerns about job cuts, wage stagnation, higher health care prices and the nation’s overall economy.
“The fact that these mergers are occurring in a rapidly consolidating health insurance industry is particularly troubling,” the senators wrote, “as it raises the specter of higher health costs for small and medium sized businesses, making it more difficult to expand and hire more workers. Families facing higher premiums may similarly be harder pressed to spend household income in their local economies.”
A group of medical associations and consumer groups also sent Hesse a letter to urge her to “protect people from the harm these mergers will cause.”
The letter was signed by 43 individuals, representing citizen action groups, medical students and medical associations from states including Maine, Oregon and Kentucky.
Organizations including the American Medical Association, a trade group that represents doctors, previously had urged regulators to block the deals.
The opposition from medical and hospital associations does not surprise former law professor Geoffrey Manne, who wrote in a column for The Hill, a Washington, D.C.-based politics and public policy newspaper, that most of the opposition is easily explained.
“The most vocal merger critics are opposed to the deal for a very simple reason: They stand to lose money if the merger is approved. That may be a good reason for some hospitals to wish the merger would go away, but it is a terrible reason to actually stop it.”
Manne wrote that the opposition from the American Hospital Association is a “good indication that the merger will benefit consumers, in part by reducing hospital reimbursement costs under (Medicare Advantage) plans.”
Mann also wrote that an oft-cited study by opponents showed that the Aetna-Prudential merger had “negligible effects” on premiums and occurred so long ago that “they really don’t tell us much of anything about the likely effects of a particular merger today.”
Some more good news for Aetna-Humana: Illinois has become the 17th state to approve the merger. That leaves only three states in which the companies do business but have not yet received approval.
The companies continue to expect their deal to be finalized in the second half of this year.