Two deals that could consolidate four of the nation's largest health insurers will likely be challenged by the U.S. government, people familiar with the matter told The Wall Street Journal.
The Justice Department is expected to file lawsuits against Indianapolis-based Anthem and Hartford, Conn.-based Aetna this week or next. The challenges arrive after a yearlong review of the potential mergers.
Here are 10 things to know:
1. Upon news that the deals were in jeopardy with the DOJ, Anthem shares dipped 2.2 percent to $132.06 and Bloomfield, Conn.-based Cigna's fell 2.1 percent to $130.30. Aetna shares sank 2.7 percent to $115.15 and Louisville, Ky.-based Humana stocks slid 3.9 percent to $153.38, Bloomberg reported.
2. Aetna and Humana will most likely fight the challenge. Leerink Partners analyst Ana Gupte told Bloomberg there is a smaller possibility Anthem and Cigna will fight any lawsuit.
3. If the deals unwind, Anthem is required to pay a $1.85 billion breakup fee to Cigna per their agreement. Aetna will need to pay $1 billion to Humana per similar agreements, the New York Times reported.
4. Anthem announced its $54 billion acquisition of Cigna in July 2015, weeks after Aetna inked its $37 billion deal with Humana.
5. The deals would heavily concentrate the health insurance industry, folding five of the largest insurers into three. Annual revenue for the top three — Minnetonka, Minn.-based UnitedHealth, Anthem and Aetna — would amount to more than $100 billion each, WSJ reported.
6. Approval of the Anthem-Cigna deal would establish the nation's largest insurer per enrollment, with more than 54 million policyholders, an annual revenue of $117 billion and national market share of about 29 percent.
7. Approval of the Aetna-Humana deal would result in the largest Medicare Advantage plan seller, with total revenue around $115 billion, WSJ reported. Humana claims 17 percent of the nation's Medicare Advantage plans, while Aetna has 7 percent. In states with the largest overlap, such as Missouri, that means the resulting insurer would control 50 percent of the Medicare Advantage market statewide, and 90 percent in some counties.
8. To assuage antitrust regulators, Aetna presented a plan to the DOJ to divest its Medicare Advantage assets earlier this month.
9. DOJ and state insurance regulator approval is required for both deals to go through. Aetna gained approval from 18 of 20 states where regulatory sign-off is required, and Anthem garnered approval in 10 of 24 states, according to Bloomberg.
10. If both deals are withdrawn, 2015 would no longer be the largest year ever for mergers and acquisitions globally, the New York Times reported.
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