Bioethics Blogs

Aetna-Humana and the challenges of regulating while outsourcing

The health insurance industry has been in flux over the past few years, from the phasing in of major provisions of the Affordable Care Act (ACA) to a frenzy of consolidation. Of the country’s “big 5” health insurers (see table), UnitedHealth approached Aetna and Aetna approached Cigna about potential acquisitions. In July 2015, Aetna agreed to buy Humana for $37 billion and Anthem agreed to pay $54 billion for Cigna. Both deals were blocked by the Department of Justice (DOJ) and then litigated.

“Big 5” health insurersMarket Value
UnitedHealth Group$155.7 billion
Aetna$41.3 billion
Anthem$41.1 billion
Cigna$38.2 billion
Humana$30.1 billion

Judge John Bates of the United States District Court for the District of Columbia recently enjoined the merger between Aetna and Humana. Judge Bates sided with the DOJ, concluding that the merger would likely substantially lessen competition in violation of antitrust law. He was not convinced that efficiencies resulting from the merger and then passed on to consumers—cost savings that come from a stronger negotiating position with respect to other healthcare players, for instance—would counteract the anticompetitive effects that would operate to consumers’ detriment.

While the opinion focused on the impact of the putative merger on consumers, it also raises concerns about the power dynamic between health insurance companies and the government. The case considered whether competition would be diminished in two product lines, one being individual plans offered on state public exchanges created by the ACA. The DOJ identified 17 counties across three states where market concentration in public exchanges would reach unlawful levels post-merger.

The views, opinions and positions expressed by these authors and blogs are theirs and do not necessarily represent that of the Bioethics Research Library and Kennedy Institute of Ethics or Georgetown University.