HUM Humana Inc

By Brent Kendall and Anna Wilde Mathews 

The Justice Department is close to challenging Anthem Inc.'s proposed acquisition of Cigna Corp. and Aetna Inc.'s planned combination with Humana Inc., according to people familiar with the matter, moves that would represent strong government pushback against consolidation in the health-insurance industry.

Antitrust lawsuits against the planned mergers would be the culmination of concerns the Justice Department has had about both deals from the outset.

During a yearlong review of the mergers, the department's skepticism hasn't subsided, people familiar with the matter said.

These people said a final decision to challenge the deals could come as soon as this week.

The Wall Street Journal previously reported the mergers were in trouble at the Justice Department, with antitrust enforcers worried the deals would reduce competition and harm consumers.

The companies, however, have been given the chance to try to persuade the department that any antitrust problems raised by the deals could be addressed by shedding assets to competitors. The department has been skeptical that asset sales, or divestitures, would adequately preserve the current level of competition.

Bloomberg News reported earlier Tuesday that the department was poised to file lawsuits in the coming days.

A Justice Department spokesman declined to comment.

An Aetna spokesman said the company "doesn't comment on rumors and speculation, but we are steadfast in our belief that this deal is good for consumers and the health-care system as a whole."

Cigna and Anthem declined to comment. A Humana spokesman couldn't immediately be reached.

The deals were bold moves to reshape the top of the health-insurance business, collapsing the top five companies in the industry to three. All of the merging companies argued they could achieve cost savings and better results with the scale that their combinations would bring, amid changes and challenges tied to the Affordable Care Act.

The two deals raised different antitrust concerns, however, and legal challenges are likely to focus on distinct issues. Analysts believe that if the Justice Department does challenge both deals, the insurers are likely to fight in court.

Anthem has previously told investors that it is likely to do so, according to people with knowledge of the matter, and Aetna has prepared a package of divestitures that it has argued would remedy any competitive concerns.

The $48 billion Anthem-Cigna acquisition would create the largest health insurer by enrollment, with more than 54 million members, and $117 billion in annual revenue.

One major concern that Justice Department officials have signaled is the effect on the national employer market, where the combination would shrink the number of competitors to three from four. Other worries included the merger's affect on individual insurance plans -- the coverage sold in the exchanges that are at the heart of the Obama administration's signature health law -- and the impact on health-care providers, where a combined insurer might have greater leverage in reimbursement negotiations.

Anthem has argued the national-employer market is far more complex, with sophisticated customers who often divvy up their business. It has said the individual markets would remain competitive, and that it wished to cooperate with health-care providers.

With Aetna's $34 billion proposed acquisition of Humana, much of the antitrust focus has been on private Medicare plans, Humana's main business. An Aetna-Humana combination would become the biggest seller of Medicare Advantage plans, and have overall revenue of about $115 billion combined based on 2015 totals.

Humana has a Medicare Advantage membership of about 3.19 million, or 17% of the national market, and Aetna has around 1.38 million, or 7%, according to Wells Fargo analysts. Among the areas of greatest overlap are regions in Ohio, Florida and Missouri. Missouri's insurance regulator has said the companies' combined individual Medicare Advantage market share was more than 50% statewide and above 90% in some counties.

Aetna has floated a package of Medicare Advantage assets, attracting bids from major insurers. It also has said the full competitive landscape for Medicare plans includes traditional Medicare provided by the government.

If the deals do end up falling apart, all four companies will remain considerably smaller than industry leader UnitedHealth Group Inc.

Write to Brent Kendall at brent.kendall@wsj.com and Anna Wilde Mathews at anna.mathews@wsj.com

(END) Dow Jones Newswires

July 19, 2016 13:31 ET (17:31 GMT)

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