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All large-scale health mergers likely anti-competitive, Calif. insurance commissioner says

TheU.S. Justice Department's opposition to two multibillion-dollar healthcare mergersshows that large-scale health insurance deals are anti-competitive by natureand should not be allowed, California Insurance Commissioner Dave Jones said.

Jones,who had urged thefederal government to block Anthem Inc.'s deal for Cigna Corp. and Aetna Inc.'s planned acquisition of Humana Inc., touted the Justice Department's July 21antitrust lawsuits as a win for consumers and competition across several healthinsurance markets. The litigation also validated his decision to reject thedeals during California's regulatory review, he said in an interview.

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"We'revery pleased with the decision of the Department of Justice and the decision ofour attorney general to file suit," said Jones, the only state insurancecommissioner to publicly oppose both transactions. "The broader message isthat further consolidation in the health insurance market nationally is not agood thing for consumers."

TheJustice Department raised a series of objections in its lawsuits over theeffect the deals would have on competition and quality, warning that shrinkingthe number of large national health insurers to just three would likely resultin higher prices and fewer healthcare benefits for consumers. The agency alsoruled out the possibility that the companies could win approval by divestingparts of their businesses, calling it a "wholly inadequate" solution.

Thoseconcerns are not specific to Anthem and Aetna, Jones said, and insteaddemonstrate that national healthcare mergers in general are likely to beharmful to consumers and the wider market.

"Ithink it's very, very difficult, when you're talking about mergers of nationalscope involving companies of this size, to accomplish them," he said."You've got to look at each case on its own merits, but as to these largenational mergers, I just think the evidence has been and continues to be thatthey're anti-competitive."

Jonesalso pointed to the health insurance industry's high barriers to entry, sayingthat new competitors could not easily replace established companies such asHumana and Cigna if they were consolidated. The potential for divestitures orsales was also ruled out during his state review, he said, since the proposalslargely involved selling contracts that would soon expire and allow business toflow right back to the market's largest players.

"Quote-unquoteselling it doesn't mean anything other than, for a year, whoever bought thatcontract has that contract," Jones said. "The end result has beenmore consolidation in the market, higher prices, decreased choice and decreasedquality of healthcare. And those findings hold up, unfortunately, consistentlyacross the health insurance market."