U.S. antitrust officials are poised to file lawsuits to block Anthem's takeover of rival health-insurer Cigna and Aetna's deal to buy Humana Inc., according to a person familiar with the matter.
Justice Department officials, who are tasked with protecting competition, are concerned that the deals, which would transform the health-insurance industry by turning its five biggest companies into three, would harm customers, according to several people familiar with the situation. While the companies may offer to sell assets to gain approval for the deals, that's unlikely to sway antitrust officials, one of the people said.
The final decision to sue to block the deals could come this week and will be made by next week, another of the people said. The companies could settle a lawsuit before or after one is filed.
Shares of Humana and Cigna both fell sharply on the news. Humana plunged 4.5 percent to $152.50 at 10:13 a.m. in New York, and Cigna fell 1 percent to $131.85. Aetna fell 2.4 percent to $115.56 and Anthem fell 2 percent to $132.25.
The Justice Department declined to comment on the review.
Alex Kepnes, a Humana spokesman, and T.J. Crawford, an Aetna spokesman, didn't immediately respond to requests for comment. Matt Asensio, a Cigna spokesman, declined to comment and Bonnie Jacobs, an Anthem spokeswoman, had no immediate comment.
For antitrust officials at the Justice Department, it is standard practice to prepare complaints against deals even in cases that are ultimately settled with remedies like asset sales. But in recent years, the department has shown an increasing willingness to go to court and block deals it believes could stifle competition, and antitrust officials have for months signaled their skepticism about the insurer tie-ups.
The Justice Department's No. 3 official, Bill Baer, who previously ran the antitrust division and is overseeing the investigations into the insurer mergers, earlier this year said the two deals were "transformational" and represent a "game changer" for the industry.
The government's concerns echo a broader sentiment within the Obama administration that competition must be protected in the health-insurer sector in order to deliver quality health care to Americans. This month, President Barack Obama and Health and Human Services Secretary Sylvia Mathews Burwell have both cited the importance of competition in insurance markets.
In addition to the Justice Department's antitrust division, state attorneys general also have raised concerns about the mergers and may join any Justice Department challenge, two people said.
Any lawsuit would continue a string of merger challenges by antitrust enforcers looking to stop industry consolidation and would deal a blow to Anthem and Aetna's bids to gain scale by snapping up rivals. According to the terms of both tie-up deals, the companies have agreed to fight any government lawsuits in court. Such a move would likely require months of litigation to rescue takeovers that were struck last year amid a wave of deals that swept the industry.
The combinations faced criticism from the start from consumer groups worried about higher premiums as well as from hospitals and doctors, who risk seeing lower payments from insurers that have more bargaining power. In June, a group of Democratic senators called for the Justice Department to stop the transactions.
America's Health Insurance Plans, which represents the health-insurance industry, has said that the insurer combinations were necessary to counter the growing power of hospitals, which themselves have grown larger through mergers.
The $48 billion combination of Anthem and Cigna would create the biggest U.S. health insurer by membership, topping UnitedHealth Group Inc., with total revenue of about $117 billion. The bulk of the company's revenue — about 66 percent — would come from administrative services sold to self-insured employers. The combined company would have about 29 percent of that market, according to data compiled by Bloomberg.
Aetna's $37 billion takeover of Humana would make it the biggest provider of Medicare Advantage plans, the government insurance program for the elderly. The combined company would have about 25 percent of that market, according to Bloomberg, with about half its $115 billion in revenue coming from Medicare plans, Aetna has said.
Bloomberg reported earlier this month that Aetna was preparing to sell assets worth several billion dollars to resolve competition problems.
Zachary Tracer contributed.