Cigna will buy the nation’s number one pharmacy benefits manager Express Scripts in a deal worth about $67 billion of cash, stock, and debt.
As The Department of Justice (DOJ) recently filed Antitrust lawsuits against both the Connecticut-based Aetna and Indianapolis-based Anthem “Mega-Mergers,” the DOJ is suggests a February start date to the trial. With Aetna aiming to complete a $37 billion acquisition of Humana and Anthem proposes an even larger $53 billion purchase of Cigna; federal prosecutors suggest they’ll need at least 200 days to prepare their case. Though the insurers are advocating for sooner trials, the DOJ contends the complexity of these cases requires significant time.
The Medicare Advantage (MA) competition between Aetna, the fourth-largest MA provider and Humana, the second-largest Medicare provider with 3.1 million beneficiaries, largely benefits Medicare recipients in over 600 counties in which both providers serve. In this case, Aetna and Humana would enjoy roughly 25% of the national MA market, according to Bloomberg.
The Anthem combination with Cigna would considerably impact self-insured employers who opt to receive administrative services from these companies. This revenue alone would constitute 66% of the newly combine conglomerate’s revenue and roughly 29% of the market, also according to Bloomberg.
At this point, Judge John Bates is continually contending that he cannot and will not hear both cases by the end of the year, despite urges from the defendants. Continually reported “contentiousness,” as both deals’ termination dates may pass before the ruling is complete. Humana can walk away from Aetna’s proposal on December 31st earning a $1 billion break-up fee, with Cigna potentially receiving $1.8 billion if Anthem cannot complete the merger by April 30, 2017. Regardless of lobbying efforts on behalf of these carriers’, this lawsuit will likely extend over a significant period of time, as it should considering the potential impact.
Developments continue regarding the proposed mergers between Anthem/Cigna and Aetna/Humana. Yesterday, the Justice Department reported they will likely file lawsuits this month to halt both proposed mergers. If the Justice Department does take action, it may significantly delay any merger. Additional details can be found at the link below:
Pending such action by the Justice Department, Georgia’s Department of Insurance continues their own review of the proposed mergers and has scheduled the required public hearing for the Aetna/Humana proposed merger:
Aetna/Humana Public Hearing
Tuesday, July 26
Georgia Department of Insurance
DOI has not yet announced the hearing date for the proposed Anthem/Cigna merger; SHP will provide this date once announced.
If you have any questions regarding these developments, please contact us. Thank you!
If the proposed Anthem/Cigna and Aetna/Humana mergers are allowed to proceed, the combined entities will control roughly 90 percent of both Georgia’s individual health insurance market. Additionally, these entities will subsequently control 90 percent of both the Medicare Title XVIII market and the large group markets in Georgia. The carriers assert that consolidation will improve their ability to operate more efficiently and enhance care quality, however the sheer size of their presence is concerning. The Medical Loss Ratio (MLR) found in Section 1001 of the Patient Protection and Affordable Care Act stipulates an annual minimum of 80% (Individual/Small group Plans) – 85%(Large Group Plans) of the share of health care premium dollars are spent on medical benefits, thus encouraging mergers/acquisitions to bring profitability to scale for these major insurers. Health Affairs, amongst others, offer considerable evidence that there is no clear pattern of administrative cost savings associated with these mergers, as Anthem states no they will not reduce staff size, most of the savings inherently will be found in discounting Cigna’s payment rates they’ve negotiated under their Blue Cross Blue Shield name brand.
Recently, a Medical Association of Georgia (MAG) survey highlighted 30% of Georgian physicians believed that the Aetna/Humana merger alone would threaten the long-term viability of their practice. Dr. John Harvey, president of MAG, explicitly stated his fear for Georgia’s consumers as rural providers will maintain even less leverage with these conglomerates. Similarly The American Medical Association (AMA) argued that both mergers independently would reduce market power for providers and consumers here in Georgia. California’s Insurance Commissioner recently argued the $53 billion Anthem/Cigna deal does not explicitly offer verifiable support to increase quality or access which will become inherently detrimental for patients, providers, and employers. As of late June 2016, several representatives are continuing to oppose each deal of anti-competitive levels of market concentration, it is imperative to maintain dialogue with our representatives.
If you have any questions on these issues please contact our office at (912) 691-5711; we strongly urge you to contact your representatives including Department of Insurance Commissioner Ralph Hudgens at email@example.com or:
Administrative Procedure Division 2
2 Martin Luther King Jr. Drive, West Tower
Atlanta, GA 30334