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Senate Democrats Urge Justice to Block Health Care Mergers

By Jad Chamseddine, CQ Roll Call

June 24, 2016 -- Democrats in the Senate urged the Justice Department for the first time to block Anthem Inc.'s acquisition of Cigna Corp. and Aetna's proposed purchase of Humana Inc. over concern the combination of health insurers would raise premiums and hurt competition.

In a letter to the interim head of the Justice Department's antitrust division, Renata Hesse, seven senators led by Democrat Richard Blumenthal of Connecticut made clear they do not support further consolidation among health insurance companies.

"We urge the DOJ to challenge these mergers from proceeding and to prevent the damage they would cause to competition and consumers," according to the letter. It is rare that members of Congress specifically request federal regulators to block a transaction, instead often simply asking them to scrutinize a deal to be sure consumers aren't harmed.

The letter comes amid reports that Justice Department officials are concerned about adverse effects on consumers from Anthem's proposed acquisition of Cigna and that meetings with executives from the merging parties are scheduled through the week.

Blumenthal, who serves on the Senate Judiciary Antitrust Subcommittee and has previously complained of too much consolidation in several industries, was one of the first lawmakers to speak out when the transactions were announced a year ago.

The letter cites the effect previous mergers have had on prices, such as Aetna's acquisition of Prudential's health care business, in which premiums rose by 7 percent in the markets where both operated. The senators argue the merger "would make an already concentrated market" less competitive and create three dominant companies; Anthem, Aetna and UnitedHealth Group Inc., that would control 91 percent of the national market.

The letter paid particular attention to the reduction in competition for Medicare Advantage, a type of Medicare health plan offered by private insurers, if the deal between Aetna and Humana is approved.

Aetna and Humana oppose this argument, saying Medicare Advantage is an interchangeable product with regular Medicare, and therefore its market dominance isn't as high as the merger opponents' argue. But the lawmakers said in the letter "consumers do not view Medicare and Medicare Advantage as meaningful substitutes."

The merger among four of the five largest health insurers has been opposed by several groups, including the American Hospital Association, American Medical Association and the American Psychiatric Association, with all calling for the Justice Department to block both transactions on grounds similar to those cited by lawmakers in the letter.

The lawmakers also took a shot at the willingness of enforcement agencies to settle mergers by agreeing to remedies instead of simply blocking the deals. "Divestitures have proven to be an ineffective remedy for restoring competition," the senators said.

The Justice Department and the Federal Trade Commission, the other government agency in charge of reviewing mergers, often impose conditions in approving a merger in which the parties agree to sell assets to a third party to keep competition in an industry.

Blumenthal has been particularly critical of failed merger remedies, and aired his concern during an antitrust oversight hearing in March, calling on enforcement agencies to rethink the process. Besides focusing on antitrust policy, the letter questioned both mergers' effects on jobs and wages, arguing that "history shows that mergers can frequently cause job losses as firms eliminate supposedly redundant positions."

The Justice Department is still reviewing both transactions, and has not set a timeline when to expect a decision. The mergers are undergoing review in several states, but have received approval in others.

Just this week, the California Department of Managed Health Care approved Aetna's deal to buy Humana, while California's insurance commissioner recommended late last week that enforcement agencies block Anthem's acquisition of Cigna.

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