The Obama administration went to court Thursday to block two major health insurance mergers, siding with consumer advocates and medical groups worried that the consolidation of large national health plans could lead to higher premiums. The long-anticipated move by the Justice Department and attorneys general in 10 other states, including California, will at least temporarily prevent Anthem Inc.'s purchase of Cigna Corp., a combination that would have created the nation's largest health insurer. And it will stop Aetna Inc.'s bid to acquire Humana Inc., a merger that would have combined the nation's third and fifth biggest health plans. "Competitive insurance markets are essential to providing Americans the affordable and high-quality healthcare they deserve," Atty. Gen. Loretta E. Lynch said Thursday after the suits were filed in federal district court in Washington.
Two major health insurance deals that would reshape the industry's landscape -- Anthem Inc.'s purchase of Cigna Corp. and Aetna Inc.'s deal to acquire Humana Inc. -- appear to be in trouble amid concerns they would reduce competition. The Justice Department, which has been reviewing both transactions, is preparing lawsuits to block them, Bloomberg News and the Wall Street Journal reported Tuesday. A decision whether to file the suits could come as early as this week, and the companies could fight in court or agree to settle, the reports said. A Justice Department spokesman declined to comment. Shares of the four companies fell 2% to 4% on Tuesday.
Wall Street expressed growing doubts about a pending 54 billion merger of U.S. health insurers Anthem Inc and Cigna Corp on Monday as news of management squabbles added to concerns over its review by antitrust regulators. Cigna shares closed down 4 percent at 126.15, well below Anthem's original 188 per share offer of cash and stock announced last July. Anthem shares fell 1.8 percent to 133.18. "The market is telling you that it feels the probability of the deal is significantly less than 100 percent," Morningstar analyst Vishnu Lekraj said in a telephone interview. He declined to provide his own probability forecast.
UnitedHealth Group, which made waves Tuesday when it announced it would exit most Affordable Care Act health insurance exchanges in 2017, is hardly the only company in the healthcare industry that has not yet developed a recipe for guaranteed success in an Obamacare world. Other major insurers -- Cigna, Anthem, Humana and Aetna -- are in the midst of proposed mergers that have generated controversy and drawn scrutiny, even as the companies themselves say the mergers are necessary for better business and quality of care. These companies are scheduled to report earnings starting next week, and analysts expect to see top-line growth, but flat margins, as these companies continue testing new strategies to generate profit in a sector undergoing significant upheaval. "We don't know if they're actually making money on certain segments of the business," Dustin Eggers, a principal at Decision Resources Group in Chicago, said of health insurers that are selling plans on Affordable Care Act exchanges. There are a lot of issues with that population," he pointed out.
Quarrels have broken out behind the scenes of Anthem (ANTM) 48 billion proposed acquisition of Cigna (CI)as the health insurers seek regulatory approval for their landmark deal, according to a series of letters reviewed by The Wall Street Journal. People on both sides say the squabbles could delay or derail antitrust approvals, which are typically harder to obtain if both parties aren't in sync. While neither company has sought to terminate the merger, the people say, and it doesn't appear in danger of imminent collapse, Anthem and Cigna are bickering on several fronts. In the correspondence, between top officials including their chief executives, Anthem and Cigna accuse each other of violating the July merger agreement and fumbling submissions to regulators. The finger-pointing---over matters large and small---reflects rancor that is unusual even in the cutthroat world of corporate takeovers.