Florida became the 10th state to approve Aetna’s $34 billion takeover of rival Humana Monday, paving the way for shakeups among the country’s largest health insurance carriers to move forward. Yet despite this success, analysts say convincing the federal government of the plans’ suitability will be a much tougher endeavor.
At issue are two pending mergers between four major health insurers: Aetna and Humana, and Anthem and Cigna. State insurance regulators have been largely accepting of the transactions, though some – like Florida – are adding expanded Affordable Care Act coverage as conditions of approval.
Aetna said it was pleased with Monday’s decision and that it now has half the necessary state approvals it needs to go forward with the acquisition. However, the company must clear the hurdle of getting approval from the Department of Justice, and that’s something on which Aetna is more cautiously optimistic.
“The DOJ conversations are not even yet started on the divestiture front,” Aetna CEO Marc Bertolini said on the carrier’s fourth quarter conference call earlier this month. “We’re still sharing data and working on the framework of the discussions.”
Anthem’s planned $54 billion acquisition of Cigna is undergoing similar pains. The transaction has been approved so far by four states: Alabama, Tennessee, Nevada and Montana. Twenty-two other states are reviewing the deal, as well as federal regulators.
Cigna CFO Thomas McCarthy said things were progressing as expected, but cautioned investors that “we’ve got a long way to go.”
The DOJ has made no secret of its intention to carefully scrutinize the proposed mergers. Along with the Federal Trade Commission, the department has been speaking with some critics of the mergers, including doctors and hospital groups that argue consolidation among health insurers will push reimbursement rates too low.
Robert Doherty, senior vice president of government affairs with the American College of Physicians, told CNBC that he spoke with DOJ regulators who were “interested in the perspective of rank and file physicians.” He apparently told regulators that combining the companies could drive primary care doctors and small physician practices out of business.
“They typically will not have the leverage to be able to say no to an insurance contract, when that insurer may control 50% to 60% of the patients they see,” Doherty said.
Concerns over consumer choice have also dominated the conversation among regulators – and agents.
“Competition is a good thing. Any time one entity controls too much market share…there should be concern,” Edward Yates, Jr. told Insurance Business America. “When these options are diminished, it can certainly affect my ability to compete and place clients. The way in which mergers are managed and executed can have a high impact on client relations across the board. If the execution is not smooth, client relations suffer, and it can become difficult to get things done, such as underwriting transactions.”
Despite the heightened scrutiny, leaders with both Aetna and Anthem say they are optimistic their transactions will be approved and completed by the end of the year – and will not affect consumer choice.
Anthem CEO Joseph Swedish in particular characterized the potential takeover of Cigna as a deal that would result in “the scale to drive greater efficiency and affordability for our customers” as well as “improvements in the total cost of care.”
The DOJ has not officially commented on ongoing consideration of the two mergers.
