The U.S. Department of Justice is preparing to go to court to block two giant health insurance mergers, a development that is surprising, but not shocking.
Thus far, the four companies involved in the two proposed mergers Anthem-Cigna and Aetna-Humana have kept their public response to antitrust concerns relatively vague, arguing in general terms that their increased size will not significantly reduce competition in the insurance market but will allow them to offer better service to members.
By merging, they have argued, they will become more efficient and stronger in price negotiations with hospitals and pharmaceutical companies, which will lead to lower costs for their members.
Aetna will have to convince a judge that its acquisition of Humana, one of the leading providers of Medicare Advantage plans, the private sector alternative to traditional Medicare, will not significantly harm competition in that market.
Some expert observers suggest, however, that the companies might be able to point to the continued existence of traditional Medicare to counter the evidence that they will indeed dominate the Medicare Advantage market.
Considering that two-thirds of seniors still opt for the government-run Medicare plan, a highly consolidated private Medicare market might not be viewed through the same lens as most antitrust battles.
Mark Rust, an antitrust attorney, explained to CNBC that while the proposed Aetna-Humana company would account for a quarter of the Medicare Advantage market, it would only occupy 5 percent of the overall Medicare market. Five percent is hardly a monopoly.
That type of argument is not going to be available to Anthem and Cigna, which are mostly vying for the non-senior private insurance market. While millions of non-seniors are covered by public health programs, notably Medicaid and the Veterans Administration, both of those programs are only open to certain segments of the population, and therefore do not truly compete with the private sector insurers.
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