The U.S. Department of Justice Thursday sued to block Anthem’s $54 billion acquisition of Cigna and Aetna’s $37 billion acquisition of Humana, a year after the companies announced their respective deals.

In a press release, the DOJ said 11 states—California, Colorado, Connecticut, Georgia, Iowa, Maine, Maryland, New Hampshire, New York, Tennessee and Virginia—and the District of Columbia joined the DOJ’s challenge of Anthem’s $54 billion acquisition of Cigna. Eight states—Delaware, Florida, Georgia, Iowa, Illinois, Ohio, Pennsylvania and Virginia—and the District of Columbia joined the DOJ’s challenge of Aetna’s $37 billion acquisition of Humana.

In prepared remarks for a press conference today, Principal Deputy Associate Attorney General Bill Baer discussed at length the logic behind the suits, noting that each deal “poses unacceptable risk to competition.”

“The two mergers…put at risk the system that Americans across the country rely on to pay for their healthcare—threatening to increase insurance premiums, reduce benefits, lower the quality of healthcare and slow innovation,” Baer said.

The DOJ believes that the combined company would substantially reduce competition, harming millions of Americans, doctors, hospitals and employers. It was particularly concerned with the effect on large employers with multiple locations in multiple states. As Baer noted, those employers have only four options, “and two of those are Anthem, together with its Blue Cross allies and Cigna, which Anthem wants to eliminate as a rival.”

Baer also cited Cigna’s innovative ways it is working with doctors on wellness plans, directly acknowledging Cigna Collaborative Care—Cigna’s commercial ACO program. Cigna has more than 150 Collaborative Care agreements in place.

Anthem said it was “fully committed” to a legal battle and was open to a settlement with the DOJ to allow the plan to move forward. Cigna, however, was less enthusiastic. In a statement, the company said, “In light of the DOJ’s decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all.”

Anthem has a powerful incentive to ensure that the deal goes through. If regulators prevent the merger and their decision is final and nonappealable, or if the merger hasn’t closed by Jan. 31, 2017, Anthem is required to pay a $1.85 billion termination fee. 

Unlike Anthem and Cigna, Aetna and Humana presented a united front to media outlets, responding in a joint statement that they will “vigorously” fight to complete their merger. If the deal isn’t approved, Aetna would owe Humana $1 billion, under similar terms.

The DOJ’s issue was that Humana is already a leading Medicare Advantage provider. Aetna’s acquisition of Humana would give the entity a 43 percent national share, according to an analysis by Bloomberg.

Our Take: As we reported in May, Bill Baer proved to be a key figure in the fate of the deals. Baer is a rising star in the DOJ and all accounts point to a man wanting to make a visible public stand.

But truth be told, this really wasn’t a difficult decision to make—or a difficult political position to hold. Everyone was against the mergers, except for the insurance giants themselves (and we’re even not so sure about Cigna’s enthusiasm by the end). Because no matter where you looked—physicians, hospitals, consumers, government—potential harm was obvious to see. Too much power in the hands of too few.

Which brings us to President Obama. Many analysts thought that these deals would slide under the idea of “bigger is better” when it comes to achieving The Triple Aim. And that might be true, but there is clearly a tipping point. Obama might have initially wanted a single-payer system back in 2008 when he was advocating for health reform, but he’s clearly changed his mind. The decision by the DOJ and FTC was about market forces and competitiveness: their concern was having too much concentrated market power in the hands of Anthem and Aetna, with no countervailing force.

Obama and the agencies examining the merger concluded that if the ACA is to hold, competition is required. These deals failed to pass this test, and it’s unlikely that further negotiations and lawyering will change this simple fact.

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