Big US health insurers have been trying unsuccessfully to form megamergers that would reshape the industry.
Most recently, a proposed $48 billion merger of Anthem and smaller rival Cigna was halted by a federal judge, who said it would harm customers. The deal would have created the largest health insurer in the US by membership.
“The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects”, Judge Amy Berman Jackson wrote. “It will eliminate the two firms’ vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market.”
The defence argued that the deal could enhance competition by creating billions of dollars in savings. However, the merger process had been contentious. Citing the disputes that arose between the two companies, government antitrust officials countered that achieving such savings would require close cooperation between Anthem and Cigna.
Two weeks earlier, another federal judge blocked a proposed $37 billion merger between health insurers Aetna and Humana on antitrust grounds. Both mergers were announced a year and a half ago, according to the New York Times. Had they gone through, the two deals would have brought the five biggest insurers down to three, significantly altering the already highly concentrated US health insurance sector.
“If these mergers were to take place, the competition among insurers that has pushed them to provide lower premiums, higher-quality care and better benefits would be eliminated”, then-US Attorney General Loretta Lynch said in July 2016.
Health insurers in the US have sought mergers in order to adapt to a market changed by the Affordable Care Act, known as “Obamacare.” They also believe the mergers would give them more leverage when negotiating with hospital systems, which have also gone through a wave of mergers in recent years.
With the Trump administration touting a policy of “repeal and replace” regarding the Affordable Care Act, the future is uncertain. JPMorgan analyst Gary Taylor believes more deals could be coming. “Given Anthem and Cigna's pursuit of Humana in 2015, we think new potential combinations could emerge”, Taylor wrote.
