An associate dean with the Indiana University School of Business says the proposed $54 billion merger of Indianapolis-based Anthem Inc. (NYSE: ANTM) and Cigna Corp. (NYSE: CI), and the Department of Justice lawsuit to block it, are the results of a continuing "arms race" between insurers and providers. Phil Powell says employers will be paying special attention to the ongoing case, as a merger could decrease price competition and drive up health care costs. He says the results of November’s election will also likely play a big role in how hard the government pushes the case.
The Obama administration, says Powell, is pushing the case hard, which would likely continue of Hillary Clinton is elected president. If Donald Trump is elected, he says the administration would be "less inclined to fight a merger." Either way, Powell expects the case to "extend years beyond the election."
U.S. Attorney General Loretta Lynch also announced Thursday the department would work to halt the merger of two other "Big Five" health insurance providers, Humana Inc. (NYSE: HUM) and Aetna Inc. (NYSE: AET). During a news conference, she said the mergers would end up "drastically restricting" competition and have a major negative impact on consumers. She says that competition ls essential for lower premiums and higher-quality care for consumers.
Powell says Anthem has legitimate arguments as well, as creating a larger company would allow it to split costs among a larger pool of insurers. He says, while Anthem obviously did not want the challenge, the company is likely not stunned by it, and has a strategy in place to move forward regardless of the outcome.
In a statement, Anthem Chief Executive Officer Joe Swedish says the department’s lawsuit is "based on a flawed analysis and misunderstanding of the dynamic, competitive and highly-regulated health care landscape in which we operate."
For its part, Anthem says it will challenge the decision in court and "remain receptive" to any settlement that would allow the deal to proceed. Shareholders from both companies approved the merger in December.
Powell says Anthem could have a tough road ahead with the proposed merger.