These 3 Rumored Managed Healthcare M&A Deals Could Create Antitrust Time Bombs

The morning after Cigna Corporation (NYSE: CI)'s board of directors rejected a $47.5 billion takeover bid from Anthem Inc (NYSE: ANTM), Susquehanna Financial Group analyst Chris Rigg released a report focusing on the potential antitrust implications of a number of recently-rumored M&A deals in the managed care field.

According to the report, antitrust concerns could be a real threat to a handful of potential managed care mergers.

Enrollment Numbers

Rigg looked at the concentration of risk-based, Medicare Advantage and Medicaid enrollment in each state and for each potential M&A combination to determine the potential for antitrust vulnerability.

“We’ve been getting questions from clients on the antitrust exposure/overlap of the managed care [companies] that are the subject of recent M&A speculation,” Rigg writes in the report.

Limitations

While Susquehanna has no statutory information on administrative services only (ASO) membership, Rigg explains that Medicare/Medicaid enrollment numbers offer a good rough indicator of the type of market domination that the potential mergers would hold on a state-by-state basis.

Another limitation of the state numbers is that antitrust review would likely be performed at the county level. Rigg also mentions the “unknown divestiture threshold” of the potential deals as another reason that concrete antitrust implications are difficult to pin down.

Three Most Problematic Potential Deals

After crunching the numbers, Susquehanna determined that three potential deals would be more dangerous than the others when it comes to market domination.

First, a combination of Aetna Inc (NYSE: AET) and Humana Inc (NYSE: HUM) might draw antitrust challenges in states such as Kansas and Florida.

A merger of Humana and Anthem could raise antitrust concerns in Colorado, Georgia, Kentucky and Wisconsin.

Finally, a combination of UnitedHealth Group Inc. (NYSE: UNH) and Aetna could be grounds for antitrust challenges in states such as Nebraska, where a potential combined enrollment would account for 86 percent of the total managed care state’s Medicaid enrollment.