AP Photo DOJ files lawsuits to block mergers of insurance giants

The federal government on Thursday filed lawsuits to block two proposed mergers of health insurance giants, citing concerns the deals would limit competition in the insurance market and potentially undermine Obamacare.

The Department of Justice lawsuits could kill Anthem's plans to acquire Cigna and Aetna's takeover of Humana. The mergers would pare down the health insurance industry from five major players to three.


“If allowed to proceed, these mergers would fundamentally reshape the health insurance industry,” Attorney General Loretta Lynch said in a press conference. “They would leave much of the multi-trillion dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care.”

In statement, Anthem called the DOJ lawsuit "an unfortunate and misguided step backwards for access to affordable healthcare for America" and promised to challenge the decision in court. It also left open the possibility of negotiating an agreement with DOJ to let the merger go through. Its partner in the $54 billion merger, Cigna, said it now believes the deal won't close before 2017, "if at all."

Aetna and Humana, in a joint statement, also promised to fight the DOJ lawsuit. They argued that a combined company is in the best interest of consumers, especially for seniors enrolled in their Medicare Advantage plans. If their deal goes through, the combined company would be the largest seller of private Medicare plans.

In particular, DOJ lawyers worried that the mergers would have hurt the Medicare Advantage market. DOJ also cited the effect the potential mergers would have on Obamacare’s exchanges, where insurers compete to sell individual coverage to people without access to insurance through an employer or other public programs.

"All four of these folks are actively involved in the exchanges," said Principal Deputy Associate Attorney General Bill Baer.

Consumer advocates fretted the mergers would mean increased health insurance premiums. Advocates and major medical groups, including the American Medical Association and the American Hospital Association, applauded the lawsuits.

"The Justice Department clearly shares our concerns about how these deals would impact consumers after its careful and thorough investigation," Consumers Union said in a statement.

Despite Obamacare's massive coverage expansion, affordability of health insurance remains a major concern for Americans. Just last week, President Barack Obama made the case for creating government-run insurance plans as an antidote for premium increases in parts of the country where competition is limited.

Some market analysts said Thursday that the lawsuits may push the insurance companies to drop their planned mergers.

“The feeling is that Aetna and Anthem will go through the court process [to fight the lawsuits] which unfortunately means another six to 12 months of uncertainty around the deal and investors certaintly don’t like uncertainty,” said Ipsita Smolinski, managing director at Capitol Street.

The insurers have lobbied hard for the deals since they were announced last summer. America’s Health Insurance Plans, the industry’s trade group, argued that a stronger insurance industry could pressure hospitals for better prices.

AHIP spokeswoman Clare Krusing noted that many state insurance regulators already gave their blessings to their deals.

"Today’s announcement is a step in an ongoing process" Krusing said in a statement. "Mergers among health plans can deliver significant benefits by combining complimentary areas of expertise to ensure consumers get the best value for their health care dollars."

To appease DOJ's antitrust concerns, the insurance companies offered to sell off parts of their businesses, but it wasn't enough to satisfy department officials. The offers were "inadequate, incomplete and totally unlikely to solve the competitive problems we’ve identified," Baer said.

The judge assigned to the cases is John Bates, a former deputy independent counsel for Kenneth Starr and appointee of President George W. Bush.

Baer told POLITICO that the cases were filed separately and he expects them to be tried separately because the markets involved in the two mergers are different. However, he said, it made sense to put these cases before the same judge because "there are issues in common."

Several states, including Florida, Ohio, Pennsylvania and Virginia, joined at least one of the federal government's lawsuits.

Jennifer Haberkorn, Sarah Karlin-Smith, and Josh Gerstein contributed reporting