Consolidation in health insurance markets can injure hospitals and doctors by creating buyer-side market power that can force providers to accept below-market prices, limit patients' access to care, and reduce innovation in health care financing and delivery. In two recent lawsuits challenging the proposed Anthem/Cigna and Aetna/Humana mergers, the Antitrust Division of the US Department of Justice ("DOJ") reaffirmed that antitrust law needs to protect providers from monopsony, not just protect insurance buyers from monopoly.
The suits will allow the DOJ and the courts to further develop the legal and factual basis for challenging insurance company mergers on a monopsony theory, which may help protect providers in these and future cases.
Monopsony is the power of a large buyer to pay less than the competitive price for the services that it buys. Health insurer monopsony can harm health care providers. It can also harm patients by reducing the quality or availability of health care services, as providers provide fewer services or exit the market in response to below-market prices. The DOJ has challenged health insurer mergers on a monopsony theory in two previous cases: Aetna/Prudential (1999) and United/PacifiCare (2005), both of which resulted in consent decrees requiring the insurers to divest health insurance businesses to reduce their market shares below monopsony levels. A pending multidistrict litigation, In Re: Blue Cross Blue Shield Antitrust Litigation, No. 2:13-CV-20000-RDP (N.D. Ala.), asserts claims for damages caused by monopsony on behalf of an alleged class of providers nationwide.
On July 21, the DOJ and several state attorneys general filed two lawsuits, challenging the Anthem/Cigna and Aetna/Humana mergers as violations of § 7 of the Clayton Act, which prohibits mergers that may substantially reduce competition. The cases are similar, but have important differences that are relevant to the monopsony theory.
Both complaints describe the proposed mergers as consolidation of the "big five" insurers to the "big three, each of which would have almost twice the revenue of the next largest insurer." Both complaints say the mergers will harm competition by "eliminating two innovative competitors – Humana and Cigna – at a time when the industry is experimenting with new ways to lower healthcare costs."
The cases are different in that they focus on different product markets. The Anthem/Cigna complaint alleges that that merger will restrain competition in the "purchase of healthcare services by commercial health insurers," as well as the sale of commercial health insurance to national accounts and large-group employers, and the sale of individual policies on the public insurance exchanges. The Aetna/Humana complaint alleges anticompetitive effects only in the sale of Medicare Advantage policies to individual seniors, and the sale of individual policies on the public insurance exchanges. The Aetna complaint does not charge a violation in the market for the purchase of healthcare services, and therefore does not rely on a monopsony theory.
To view the key allegations in support of the DOJ's monopsony theory in the Anthem/Cigna complaint, please click here.
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For More Information
For questions regarding this information, please contact one of the authors, a member of Polsinelli’s Antitrust practice, or your Polsinelli attorney.