Insurer mergers beware: DOJ flexing its antitrust enforcement muscle

If the Department of Justice's leadership and recent decisions are any indication, the pending Aetna-Humana and Anthem-Cigna mergers are facing an uphill battle to gain federal regulators' approval, Bloomberg reports.

Standing in their way are Bill Baer, who has just been promoted to the DOJ's No. 3 position, and Renata Hesse, a follower of Baer's tough-on-mergers stance who replaces him as head of the antitrust division. Both have recent records of scuttling major deals--Baer deemed the just-scrapped Halliburton-Baker Hughes merger "unfixable," and Hesse led the DOJ's opposition to the now-abandoned Comcast-Time Warner merger.

Baer has characterized the deals as a "game-changer" in the insurance industry, leading the department to examine them "very, very carefully to make sure we aren't making a mistake in which shareholders benefit and the consumers pay the cost." In addition, he hinted that the DOJ is likely to consider the combined competitive effects of the mergers, which were announced within weeks of one another last summer and would pare the nation's five largest for-profit insurers down to three.

During Baer's tenure, the DOJ has also tightened its standards for how much it relies on divestitures as a remedy to deals' possible threat to competition, the Bloomberg article adds.

Not all are as impressed by the DOJ's current level of merger scrutiny, though. The Obama administration's record on antitrust enforcement has only been average given a "lack of political will" to protect competition, antitrust law professor Chris Sagers tells Bloomberg.

Similarly, Sen. Richard Blumenthal (D-Conn.) has criticized federal regulators' decision to allow the U.S. airline industry to consolidate into just four major airlines. And as Northwestern University professor Leemore Dafny noted at a panel discussion on the mergers at this week's American Hospital Association conference, the airline industry still is less concentrated than commercial health insurance.

To learn more:
- read the Bloomberg article

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