Democratic senators ask Justice Department to block insurance megamergers

By Diane Bartz

WASHINGTON (Reuters) – Seven Democratic senators urged the U.S. Justice Department on Wednesday to block two mergers of major health insurance companies, saying that the proposed deals would mean higher premiums and lower-quality healthcare for consumers.

The department is reviewing Aetna Inc’s $33 billion plan to buy Humana Inc and Anthem Inc’s $48 billion proposal to buy Cigna Corp. If approved, the deals, both of which were announced last July, would reduce the number of national health insurance carriers from five to three.

“We urge the DOJ (Justice Department) to challenge these mergers from proceeding and to prevent the damage they would cause to competition and consumers,” wrote Senators Richard Blumenthal of Connecticut, Al Franken of Minnesota, Elizabeth Warren and Edward Markey of Massachusetts, Sherrod Brown of Ohio, Dianne Feinstein of California and Mazie Hirono of Hawaii.

The letter was dated Wednesday and addressed to Renata Hesse, who heads the Justice Department’s Antitrust Division.

In the letter, the lawmakers said they were skeptical of the idea that the proposed deals would be good for consumers because the companies could use their larger size to hammer out better deals for patients.

“The evidence overwhelmingly suggests that few if any cost savings secured by the merging firms through the exercise of market power will be passed on to consumers,” they wrote.

The lawmakers also disagreed with the notion that the sale of carefully chosen assets to a competitor could resolve antitrust issues, and pointed to past instances where mergers with divestitures led to higher premiums or where competitors bought divested assets, but then did not use them.

“We are not convinced that any divestitures required of the merging parties will succeed today, given that they have so clearly failed in the recent past,” the lawmakers wrote.

Capitol Hill does not have a say in whether the Justice Department sues to stop deals.

Aetna spokesman T.J. Crawford said that the company planned to close the merger with Humana in the second half of this year.

“We believe a combined company is in the best interest of consumers. We continue to cooperate with the Department of Justice on its thorough review of the transaction,” Crawford said.

Representatives of Anthem could not immediately be reached for comment.

(Reporting by Diane Bartz, editing by G Crosse)