More on Mergers & Acquisitions

15 states join probe of Cigna, Aetna health insurance mergers

State attorneys general say proposed mega-mergers would reduce competition, are unprecedented in their size.

Susan Morse, Managing Editor

About 15 state attorneys general have joined the U.S. Department of Justice probe into two large insurance mergers that would reduce the number of big players from five to three, according to Reuters.

Anthem has proposed a $52.5 billion takeover of Cigna; Aetna pitched a $38.5 billion merger with Humana. If approved, the combined companies and the nation's largest insurer, UnitedHealth Group, would become the big three.

Connecticut, Florida, Iowa, Massachusetts and Tennessee are among the states that have joined forces to investigate the proposed deals, according to Reuters.

The other states participating in the roughly 15-member group could not be learned, Reuters said, because the investigation is not public. The presence of a large number of attorneys general joining a Justice Department probe underscores the hurdles that both proposed combinations face in winning U.S. regulatory clearance, Reuters said.

States provide data to the Justice Department on how the mergers would affect their jurisdictions and conduct joint calls to gather data from the companies, as well as critics and supporters of the deals, Reuters said.

The U.S. Department of Justice has the final authority to approve the deals, and will probe for antitrust concerns. In the past, the most common remedy to competitive concerns has been through business divestitures.

"The current deals - particularly Anthem/Cigna and Aetna/Humana -- incorporate more regulatory approval risk than past deals," said S&P credit analyst James Sung. "These deals are unprecedented in their size, complexity, and simultaneous nature."

[Also: Mega Insurance deals could have big effect on credit ratings, S&P says]

The issue has also become a political debate, with Democratic presidential candidate Hillary Clinton and several lawmakers saying they fear the pending acquisitions would hurt consumers by leading to higher insurance premiums or limited provider access, according to Reuters.

The American Antitrust Institute, in a letter to the Justice Department on Monday, said the deals would "substantially lessen competition in numerous health insurance markets," Reuters said.

The American Medical Association and American Hospital Association have also voiced opposition to the deals.

The DOJ could review the mergers as a whole or one-by-one. The first option could be seen as making the post-merger market concentration issues more glaring, according to Standard & Poor's, which weighed in on the deal's effect on credit ratings. 

Twitter: @SusanJMorse