DOJ sues to block Anthem/Cigna, Aetna/Humana mergers as companies plan to fight back

Anthem and Aetna plan to pursue in court the Department of Justice's injunction to block their respective mergers with Cigna and Humana, according to statements from both insurers.

The DOJ filed the injunctions Thursday to block Anthem's $53 billion proposal to buy Cigna and Aetna's proposed $37 billion takeover of Humana, in deals that would reduce the number of large insurers from five to three.

"Today we filed to block the mergers," Attorney General Loretta Lynch said. "These mergers would fundamentally reshape the health insurance industry. They would leave much of the multi-trillion dollar health insurance industry in the hands of three mammoth insurance companies and restrict competition in key markets."

The DOJ said the proposed mergers of Anthem with Cigna and Aetna with Humana would harm consumers and are illegal due to antitrust laws. No amount of divestiture can remedy the problem, the DOJ said.

Deputy Associate Attorney General Bill Baer said there is nothing to show that these concerns could be solved through divestiture.

[Also: Speculation swirling around potential block of big payer mergers]

"Will the status quo be preserved?" he said. "We have zero confidence that proposals made to us come close to meeting that standard."

Both Anthem and Aetna countered that the mergers are in the best interest of consumers.

"Anthem is fully committed to challenging the DOJ's decision in court but will remain receptive to any efforts to reach a settlement with the DOJ that will allow us to complete the transaction and deliver its benefits at a critical time when American consumers are seeking high quality healthcare services with greater value at less cost," Anthem said through spokeswoman Jill Becher.

The merger with Cigna would improve Anthem's mission of improving consumer choice, quality and affordability, she said.

"Today's action by the Department of Justice (DOJ) is an unfortunate and misguided step backwards for access to affordable healthcare for America," Anthem said. "The DOJ's action is based on a flawed analysis and misunderstanding of the dynamic, competitive and highly regulated healthcare landscape and is inconsistent with the way that the DOJ has reviewed past healthcare transactions."

"Aetna and Humana today announced plans to vigorously defend the companies' pending merger in response to a U.S. Department of Justice (DOJ) lawsuit seeking to block the transaction," Aetna said. "A combined company is in the best interest of consumers, particularly seniors seeking affordable, high-quality Medicare Advantage (MA) plans. The Aetna-Humana transaction offers tremendous value to consumers."

[Also: Humana stock plummets as merger with Aetna given marginal odds of going through]

Meanwhile, the American Medical Association said it applauds the DOJ efforts to block the creation of what it called two health insurer corporate goliaths, giving them unprecedented market power.

"The prospect of reducing five national health insurance carriers to just three is unacceptable," said Andrew W. Gurman, M.D., AMA president. "Today's action by the DOJ acknowledges the AMA's concern that patients' interests can be harmed when big insurers acquire rivals and develop strangleholds on local markets. Allowing commercial health insurers to become too big and exert control over the delivery of health care would be bad for patients and vitality of the nation's health care system."

The Aetna/Humana injunction took some in the industry as a surprise, as it revolved around the Medicare Advantage market and divestiture was seen as remedy to anti-competition concerns.

But the DOJ said Thursday that more seniors are turning to Medicare Advantage, making that an important market.

The deal would cut out Humana as a fierce player, the DOJ said, shrinking the number of insurers in the market from four to three.

The cases date back to July 2015 when the deals were proposed.

[Also: California regulator signs off on $37 billion Aetna-Humana merger]

On Thursday, the S&P weighed in on the effect of ratings.

The worst-case scenario is for the DOJ to reject the mergers outright through a civil lawsuit with no clear resolution, the S&P said.

"We believe fighting it in court could be a difficult path given the additional time/resources required and the limited history of success in past cases," said S&P. "However, both merging parties would have at least some incentive to pursue this route, as they have invested close to a year in pre-merger planning and stand to pay sizable termination fees if the deals don't go through."

Aetna would have to pay Humana $1 billion; and Anthem would have to pay Cigna $1.8 billion.

Twitter: @SusanJMorse