[ACCESSWIRE]
LONDON, UK / ACCESSWIRE / July 22, 2016 / Active Wall St. blog coverage looks at the headline as the Department of Justice (DOJ) have announced filing anti-trust suits in the U.S. District Court in Washington on July 21, 2016, stalling the proposed mergers between healthcare insurance companies Cigna Corp. (NYSE: CI) and Anthem Inc. (NYSE: ANTM) and that of Aetna Inc. (NYSE: AET) and Humana Inc. (NYSE: HUM). Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.
The two proposed tie-ups, that is Aetna–Humana announced on July 03, 2015 and Cigna–Anthem announced on July 24, 2015, would have led to major consolidation in the healthcare insurance sector. The combined value of these mergers is pegged to be around $85 billion.
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The Attorney General, Loretta Lynch addressing a press conference in Washington said:
"These mergers would fundamentally reshape the health insurance industry. 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."
Merging of these four entities would have impacted around 132 million Americans. The DOJ has said that the major drawback of the mergers was that it would affect competition, lead to increased healthcare costs, and compromise the quality of healthcare given to consumers.
District of Columbia and nine other states have joined the DOJ's suit against the proposed takeover of Cigna by Anthem, whereas District of Columbia and eight states joined against the proposed Aetna's takeover of Humana.
The Obama Administrations push towards affordable healthcare vide the Affordable Care Act also influences the changes in the overall healthcare insurance industry as it affects profits. Consolidations and mergers seem to be a way out of this situation for these companies.
Lawmakers and Medical Groups have lauded DOJ's action and praised its efforts.
How does this decision affect consumers?
The Healthcare Insurance industry is dominated by five big players and out of these if four players, Cigna, Anthem, Aetna, and Humana, would have merged in two separate companies, thus shrinking the pool of players to three. This would have hugely limited the number of options available as well as raising the cost of insurance for the general public.
Increasing healthcare costs due to factors like prices of prescription drugs, cost of care etc. has impacted the consumers adversely. Healthcare insurance companies in order to protect their bottom lines pass on these costs to consumers by increasing costs of insurance premiums. Healthcare insurance companies claim that the consolidation works in favour of consumers as it can improve technology used, negotiate better rates with pharmaceutical companies and hospitals thereby reducing healthcare costs. However, the percentage of these savings being passed on to the consumers is not transparent.
Response to the DOJ's decision by the companies
All the four companies seem to be committed to oppose the said lawsuit.
In a joint statement, Aetna and Humana said they would "vigorously defend" their proposed merger, and that "the facts do not support the basis for DOJ action".
In a statement Anthem stated, "Anthem is fully committed to challenging the DOJ's decision in court but will remain receptive to any efforts to reach a settlement with the DOJ that will allow us to complete the transaction and deliver its benefits at a critical time when American consumers are seeking high quality healthcare services with greater value at less cost."
However, statement by Cigna suggests that it may not move forward with the deal, which said that it was "evaluating its options consistent with its obligations under the agreement."
Following the DOJ's filing of lawsuits, Humana, on the same day, announced that it would exit from eight of the nineteen markets where it has sold Obamacare products.
Markets react positively
The stock prices of all the four companies increased after the news. Anthem's shares gained 2.61% to close at $139.00.
Shares of Aetna traded higher by 1.55% at $118.30.
Humana's shares surged 8.28% to finish the day at $171.53.
Cigna's shares advanced 5.42% to end the trading session at $ 140.32.
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