On July 21, 2016, the Antitrust Division of the U.S. Department of Justice (DOJ) filed, in federal court, complaints asking the court to block two proposed health insurance megamergers. One is Anthem's acquisition of Cigna. The other is Aetna's acquisition of Humana. The complaints allege that the mergers would "substantially lessen competition" and thereby violate Section 7 of the Clayton Act. DOJ did not demand a jury trial in either case. (See U.S. v. Anthem and U.S. v. Aetna, U.S. District Court, District of Columbia, Case Nos. 1:16-cv-1493 and 1494.)
The Plaintiffs
The complaint against Anthem includes as plaintiffs the District of Columbia and 11 states: California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, and Virginia. The complaint against Aetna includes as plaintiffs the District of Columbia and eight states: Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania, and Virginia.
The Attorneys
DOJ is represented by attorneys in the Antitrust Division. The states are represented by their attorneys general. Anthem is represented by attorneys at White & Case. Cigna is represented by attorneys at Cadwalader, Wickersham & Taft. Aetna is represented by attorneys at Jones Day. Humana is represented by attorneys at Crowell & Moring.
The Judge
Both cases were assigned to Senior U.S. District Judge John D. Bates. President George W. Bush nominated him exactly one week before 9/11. The Senate confirmed him in December 2001. He took senior status in October 2014.
The Complaint against Anthem
The complaint against Anthem is divided into 11 parts: (1) Introduction, (2) The Defendants and the Merger, (3) Background on Commercial Health Insurance, (4) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance to National Accounts, (5) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance to Large-Group Employers, (6) This Merger Likely Would Substantially Lessen Competition in the Sale of Health Insurance on the Public Exchanges, (7) This Merger Likely Would Substantially Lessen Competition for the Purchase of Healthcare Services, (8) Absence of Countervailing Factors, (9) The Defendants Have Not Proposed a Remedy That Would Fix the Merger's Anticompetitive Effects, (10) Violation Alleged, and (11) Request for Relief. Here are the first and last paragraphs of the complaint:
On July 26, Anthem filed a paragraph-by-paragraph answer to the complaint. Anthem admits some points, denies some points, and in some instances "lacks knowledge or information sufficient to form a belief." Here is Anthem's answer to the first and last paragraphs of the complaint (paragraph numbers cited within the answers are those in the complaint):
The complaint against Aetna is divided into eight parts: (1) Introduction, (2) The Defendants and the Merger, (3) This Merger Likely Would Substantially Lessen Competition for the Sale of Medicare Advantage Plans, (4) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance on the Public Exchanges, (5) Absence of Countervailing Factors, (6) Aetna's Proposed Remedy Will Not Fix the Merger's Anticompetitive Effects, (7) Violation Alleged, and (8) Request for Relief. Here are the first and last paragraphs of the complaint:
As of July 29, when I ended work on this post, Aetna had not yet filed in court an answer to the complaint. However, on July 21, Aetna and Humana issued a joint press release entitled "Aetna and Humana To Vigorously Defend Their Pending Transaction" and subtitled "Combined Company Would Improve Affordability, Quality and Consumer Choice." The final sentence of the first paragraph says: "A combined company is in the best interest of consumers, particularly seniors seeking affordable, high-quality Medicare Advantage plans."
The Status Conference
On July 29, Judge Bates issued an order granting Anthem's July 25 motion for an expedited status conference, and scheduling it for August 4. He also ordered that the conference be held jointly with the parties in the Aetna case, and that the parties file, by August 2, "explanations of their positions as to the timing of proceedings and whether proceedings should or should not be conducted jointly with those in [the Aetna case], up to and including trial." After the status conference, the judge probably will issue an order laying out a preliminary schedule for both cases.
General Observations
The complaints are strong. They say the four companies are among the "big five" in health insurance. The other is UnitedHealthcare. If both mergers are consummated, we would have the "big three." Sprinkled through the complaints are expressions such as "presumptively unlawful," "lessen competition," "increase concentration," "monopolist," and "monopsonist." One thing I consider worrisome is the possibility that the combined companies would have the power to negotiate reduced payments to healthcare providers. This could have the effect of making it more difficult for consumers to have access to providers, especially physicians.
The complaint against Anthem, with reference to large-group employers, has a U.S. map in paragraph 41 showing 35 metropolitan areas where more than 65 million people live. The complaint against Aetna, with reference to Medicare Advantage plans, includes an appendix listing 364 counties in 21 states where the loss of competition would be acute.
The lists of plaintiff states are interesting. Only the District of Columbia, Georgia, Iowa, and Virginia are plaintiffs in both cases. Connecticut, home of Aetna and Cigna, is a plaintiff only in the Aetna case. Indiana, home of Anthem, is not a plaintiff in either case. Kentucky, home of Humana, is not a plaintiff in either case.
Available Material
I am making available two complimentary PDFs. One is a 65-page package containing the 43-page complaint against Anthem and the 22-page answer by Anthem. The other is a 43-page package containing the 39-page complaint against Aetna and the 4-page press release by Aetna and Humana. Email jmbelth@gmail.com. Ask for the August 2016 package about Anthem and/or the August 2016 package about Aetna.
The Plaintiffs
The complaint against Anthem includes as plaintiffs the District of Columbia and 11 states: California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee, and Virginia. The complaint against Aetna includes as plaintiffs the District of Columbia and eight states: Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania, and Virginia.
The Attorneys
DOJ is represented by attorneys in the Antitrust Division. The states are represented by their attorneys general. Anthem is represented by attorneys at White & Case. Cigna is represented by attorneys at Cadwalader, Wickersham & Taft. Aetna is represented by attorneys at Jones Day. Humana is represented by attorneys at Crowell & Moring.
The Judge
Both cases were assigned to Senior U.S. District Judge John D. Bates. President George W. Bush nominated him exactly one week before 9/11. The Senate confirmed him in December 2001. He took senior status in October 2014.
The Complaint against Anthem
The complaint against Anthem is divided into 11 parts: (1) Introduction, (2) The Defendants and the Merger, (3) Background on Commercial Health Insurance, (4) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance to National Accounts, (5) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance to Large-Group Employers, (6) This Merger Likely Would Substantially Lessen Competition in the Sale of Health Insurance on the Public Exchanges, (7) This Merger Likely Would Substantially Lessen Competition for the Purchase of Healthcare Services, (8) Absence of Countervailing Factors, (9) The Defendants Have Not Proposed a Remedy That Would Fix the Merger's Anticompetitive Effects, (10) Violation Alleged, and (11) Request for Relief. Here are the first and last paragraphs of the complaint:
1. Anthem's proposed $54 billion acquisition of Cigna would be the largest merger in the history of the health-insurance industry. It would combine two of the few remaining commercial health-insurance options for businesses and individuals in markets throughout the country. And in doing so, it would substantially lessen competition, harming millions of American consumers, as well as doctors and hospitals.
86. Plaintiffs request: (a) that Anthem's proposed acquisition of Cigna be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; (b) that the Defendants be permanently enjoined and restrained from carrying out the planned acquisition or any other transaction that would combine the two companies; (c) that Plaintiffs be awarded their costs of this action, including attorneys' fees to Plaintiff States; and (d) that Plaintiffs be awarded such other relief as the Court may deem just and proper.The Answer by Anthem
On July 26, Anthem filed a paragraph-by-paragraph answer to the complaint. Anthem admits some points, denies some points, and in some instances "lacks knowledge or information sufficient to form a belief." Here is Anthem's answer to the first and last paragraphs of the complaint (paragraph numbers cited within the answers are those in the complaint):
1. Anthem, an insurance holding company, admits that it is proposing to acquire Cigna, another insurance holding company, valued at approximately $54.2 billion, a valuation based on the pre-announcement closing price of Anthem's common stock on the New York Stock Exchange on May 28, 2015. Anthem denies the remaining allegations in Paragraph 1. Anthem avers that the acquisition will increase competition and result in cost savings, efficiencies, and other benefits that will make healthcare more affordable and accessible to consumers. Indeed, the Complaint itself admits that Anthem today generally obtains lower rates from healthcare providers than Cigna does (Compl. ¶¶ 45, 50), and that the combined firm likely will be able to "reduce the rates" (Compl. ¶ 71) that healthcare providers charge to Anthem and Cigna customers. The Complaint also admits that "[m]ost large employers buy self-insured plans" and that each such employer retains "the risk of its employees' healthcare costs" (Compl. ¶ 16), meaning that the lower rates obtained by the combined firm will automatically flow to consumers.
86. Anthem denies that any of the requested relief is permitted or appropriate. Anthem asserts the following [seven affirmative] defenses without assuming the burden of proof on such defenses that would otherwise rest with Plaintiffs: [1] The Complaint fails to state a claim upon which relief can be granted. [2] The pricing and other aspects of the sale of insurance are regulated and overseen by federal and state laws and regulatory bodies, including, but not limited to, the Affordable Care Act and state filed rate regimes. These regulatory conditions ensure that competition will not be substantially lessened but will remain robust post-acquisition. [3] Granting the relief sought is contrary to the public interest. [4] The proposed acquisition is procompetitive. The acquisition will result in substantial efficiencies and other procompetitive effects that will directly benefit consumers in greater access to affordable healthcare. These benefits outweigh any alleged anticompetitive effects. [5] The complaint fails to adequately allege any relevant product markets or relevant geographic markets. [6] New and rapid entry, as well as expansion, by competitors will ensure that there will be no harm to competition, consumers, or consumer welfare. [7] Anthem reserves the right to assert any other defenses as they become known to Anthem. WHEREFORE, Defendant Anthem, Inc. respectfully requests that this Court deny the Plaintiffs' requested relief, dismiss this action with prejudice [permanently], and grant such other and further relief as may be proper and just.The Complaint against Aetna
The complaint against Aetna is divided into eight parts: (1) Introduction, (2) The Defendants and the Merger, (3) This Merger Likely Would Substantially Lessen Competition for the Sale of Medicare Advantage Plans, (4) This Merger Likely Would Substantially Lessen Competition for the Sale of Health Insurance on the Public Exchanges, (5) Absence of Countervailing Factors, (6) Aetna's Proposed Remedy Will Not Fix the Merger's Anticompetitive Effects, (7) Violation Alleged, and (8) Request for Relief. Here are the first and last paragraphs of the complaint:
1. Aetna's proposed $37 billion merger with Humana would lead to higher health-insurance prices, reduced benefits, less innovation, and worse service for over a million Americans.
69. Plaintiffs request: (a) that Aetna's proposed acquisition of Humana be adjudged to violate Section 7 of the Clayton Act, 15 U.S.C. § 18; (b) that the Defendants be permanently enjoined and restrained from carrying out the planned acquisition or any other transaction that would combine the two companies; (c) that Plaintiffs be awarded their costs of this action, including attorneys' fees to Plaintiff States; and (d) that Plaintiffs be awarded such other relief as the Court may deem just and proper.The Joint Press Release by Aetna and Humana
As of July 29, when I ended work on this post, Aetna had not yet filed in court an answer to the complaint. However, on July 21, Aetna and Humana issued a joint press release entitled "Aetna and Humana To Vigorously Defend Their Pending Transaction" and subtitled "Combined Company Would Improve Affordability, Quality and Consumer Choice." The final sentence of the first paragraph says: "A combined company is in the best interest of consumers, particularly seniors seeking affordable, high-quality Medicare Advantage plans."
The Status Conference
On July 29, Judge Bates issued an order granting Anthem's July 25 motion for an expedited status conference, and scheduling it for August 4. He also ordered that the conference be held jointly with the parties in the Aetna case, and that the parties file, by August 2, "explanations of their positions as to the timing of proceedings and whether proceedings should or should not be conducted jointly with those in [the Aetna case], up to and including trial." After the status conference, the judge probably will issue an order laying out a preliminary schedule for both cases.
General Observations
The complaints are strong. They say the four companies are among the "big five" in health insurance. The other is UnitedHealthcare. If both mergers are consummated, we would have the "big three." Sprinkled through the complaints are expressions such as "presumptively unlawful," "lessen competition," "increase concentration," "monopolist," and "monopsonist." One thing I consider worrisome is the possibility that the combined companies would have the power to negotiate reduced payments to healthcare providers. This could have the effect of making it more difficult for consumers to have access to providers, especially physicians.
The complaint against Anthem, with reference to large-group employers, has a U.S. map in paragraph 41 showing 35 metropolitan areas where more than 65 million people live. The complaint against Aetna, with reference to Medicare Advantage plans, includes an appendix listing 364 counties in 21 states where the loss of competition would be acute.
The lists of plaintiff states are interesting. Only the District of Columbia, Georgia, Iowa, and Virginia are plaintiffs in both cases. Connecticut, home of Aetna and Cigna, is a plaintiff only in the Aetna case. Indiana, home of Anthem, is not a plaintiff in either case. Kentucky, home of Humana, is not a plaintiff in either case.
Available Material
I am making available two complimentary PDFs. One is a 65-page package containing the 43-page complaint against Anthem and the 22-page answer by Anthem. The other is a 43-page package containing the 39-page complaint against Aetna and the 4-page press release by Aetna and Humana. Email jmbelth@gmail.com. Ask for the August 2016 package about Anthem and/or the August 2016 package about Aetna.
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Email: jmbelth@gmail.com
Blog: www.josephmbelth.com