U.S. Department of Justice's Antitrust Division Has Yet to Weigh In on Anthem/Cigna Mega-Merger Given the Go-Ahead by Shareholders

Monday, December 7, 2015
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law

On Thursday, December 3, 2015, shareholders of Anthem Inc. (Anthem) and Cigna Corp. (Cigna) approved a previously announced $54 billion mega-merger in an overwhelming 99 percent favorable vote.  The pending acquisition of Cigna by Anthem would cover approximately 53 million medical members resulting in the formation of the nation's largest health insurance company.  

The transaction is expected to close in late 2016.  However, shareholders' support alone is not sufficient to complete the merger.  The insurers still await the final approval of antitrust regulators for the U.S. Department of Justice's (DOJ) Antitrust Division.  Anthem and Cigna must meet several customary closing conditions including the receipt of certain state regulatory approvals.  They must also toll the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act ("Act") prior to final corporate consolidation.

The Act amended the Clayton Act by requiring companies to file premerger notifications with the Federal Trade Commission (FTC) and the DOJ Antitrust Division.  The Act further establishes waiting periods that must elapse prior to final acquisitions.  It authorizes enforcement agencies to stay the waiting periods until companies provide certain additional information as requested about the proposed transaction.
 
For more information about the Act, click here to read the full law at Section 18a, 15 United States Code


Not Everyone is Enthusiastic About the Deal.

The American Medical Association (AMA) and the American Hospital Association (AHA) both expressed concerns regarding the health insurance mega-merger.  The AMA made its nay-say position known by way of letter to the DOJ's Antitrust Division demanding the merger be blocked.  The AHA stopped short of making demands to the DOJ, but did make its opposition to the consolidation known.  

In a recent Yale Law School conference about competition in the health care industry, Assistant Attorney General, Bill Baer, head of the DOJ's Antitrust Division, seemed to repeatedly reference the mega-merger and his distaste for the proposed consolidation.  Along with the proposed Aetna and Humana merger, Baer voiced his skepticism on the benefits of consolidation in the health insurance industry.

Baer also cited the DOJ's long-standing history of challenging insurer consolidations in an effort to protect consumers.  He acknowledged that the department has blocked approximately seven proposed health insurance mergers in the last 15 years.  

Click here to read more about Baer's comments at the Yale Law School conference in my previous blog post. 


DOJ's Authority to Stay the Waiting Period Until it is Satisfied.


The DOJ's approval of the pending deal is not a sure thing just yet.  Aetna Inc. (Aetna) and Humana Inc. (Humana) shareholders approved the insurers' proposed merger in October, just weeks after the DOJ requested more information related to its review of the $37 billion acquisition.  This was the DOJ's second request for information made at the tail-end of the required waiting period which was extended another 30 days after Aetna refiled its premerger notification with the FTC.  For more information on the premerger notification program by the FTC, click here

In any case, there is yet to be seen a resolution to the Aetna-Humana mega-merger, which would form the nation's second largest health insurance company with more than 33 million medical members.  

It seems Anthem and Cigna may have to endure a bit more scrutiny as well before engaging in an official celebration.  However, according to reports, Anthem President and CEO, Joseph R. Swedish, appreciatively celebrated its shareholder support for the pending merger.  Swedish was reported as stating, "For more than 75 years, Anthem has played a leadership role in helping individuals to access and finance high-quality health care...The combination of Anthem and Cigna will continue this long history of leadership..."


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Sources:


Eslinger, Bonnie.  "Shareholders OK Anthem-Cigna Merger; Antitrust Check Ahead."  Law360.  Portfolio Media Inc.: 3 Dec. 2015.  Web.  4 Dec. 2015.

"Hart-Scott-Rodino Antitrust Improvements Act of 1976."  Federal Trade Commission.  Web.  4 Dec. 2015.


About the Author:
George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law.  He is the President and Managing Partner of The Health Law Firm, which has a national practice.  Its main office is in the Orlando, Florida area.  www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave., Altamonte Springs, FL 32714, Phone: (407) 331-6620.


Keywords:
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12/7/2015

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