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A glimpse into the DOJ's review of health insurer mega-mergers

Assistant Attorney General William Baer says regulators will consider merger effects locally, nationally

During a Senate oversight committee hearing this week, a federal antitrust regulator offered insight into the closely watched review of the pending Aetna-Humana and Anthem-Cigna mergers, noting that if approved, the health insurance deals could be a "game changer" for the industry.

Assistant Attorney General William J. Baer (pictured right) and Federal Trade Commission (FTC) Chairwoman Edith Ramirez said the Department of Justice (DOJ) and FTC are grappling with oversight of a "tsunami" of merger activity in recent years, including a 200 percent increase in high-value deals of $1 billion or more.

"There's a lot at play, a lot of complicated deals," Baer said.

That includes pending transactions between four of the country's five largest health insurers, deals that have drawn skepticism from consumer advocates, healthcare provider groups and lawmakers. The mergers are gradually gaining approve among state regulators, but still are waiting for the DOJ to conclude a federal review.

Baer made it clear that the DOJ is closely scrutinizing how they affect competition in local, statewide and national markets as well as how it affect consumers and employers.

"These are transformational mergers in a number of markets, including Medicare Advantage and commercial insurance, where we would be going from five national providers down to three," he said, adding that federal officials will scrutinize the deals "very, very carefully to make sure we aren't making a mistake in which shareholders benefit and the consumers pay the cost."

While Baer was careful not to offer too many details about the DOJ's pending investigation of the mergers, he did offer some clues about the factors the agency is taking into account as it conducts its review.

In response to a question from Chuck Grassley (R-Iowa) about whether the DOJ will consider how the mergers affect consumers' in-network provider choice, Baer noted that "If there's a reduction in quality that results from a merger--even if there's no price increase--that is a legitimate concern of merger enforcement both at the FTC and the antitrust division."

For his part, Richard Blumenthal (D-Conn.) said the DOJ should learn from past insurer mergers it has reviewed that showed the "futility and the failure of divestiture as a remedy," noting that, as seen in a 2012 merger between Humana and Arcadian, divested plans often end up failing.

He also asked Baer if the DOJ is looking at the combined effect of the Aetna-Humana and Anthem-Cigna mergers, which the companies announced within weeks of one another this past summer.

"Whenever you have two major transactions in an already concentrated industry occurring roughly at the same time, one needs to look at the interaction between those two transactions, and look down the road," Baer said. "It also affects one's view of whether or not one or both transactions are really fixable, because it could be a game-changer in terms of the competition in the market that you're looking at."

To learn more:
- here's the hearing webcast

Related Articles:
Report: Divestitures in Aetna-Humana merger won't help Medicare Advantage competition
Senate panel grills Aetna, Anthem execs on merger deals
Consumer coalition to advocate against health insurer mergers
Insurer mergers make headway with state regulators
Regulators have tough job in review of Aetna-Humana merger
Insurers pull out all the stops to win feds' approval of merger deals