NEW YORK/ WASHINGTON: US insurance regulators and state attorneys general are lining up to scrutinise Aetna Inc's proposed $33 billion takeover of rival Humana Inc for potential harm to consumers, complicating what is already expected to be a tough and lengthy review by federal antitrust authorities.

Insurance commissioners in 18 states including Texas, Kentucky and Florida will study merger documents provided by Humana to determine whether the deal will harm competition and lead to higher insurance premiums or diminished access to healthcare providers, according to Reuters interviews with regulators and insurance experts.

At least three state attorneys general – in Florida, Mississippi and Massachusetts – said they will look at the proposed acquisition. Local politicians and medical industry groups such as the American Medical Association have also voiced concerns about the biggest deal ever in the US health insurance industry.

The Department of Justice is taking the lead on the transaction and may ask for asset sales or challenge a deal in court. But the concerns of state insurance commissioners are likely to have added weight since health insurance is heavily regulated at the local level, antitrust experts said. State regulators are also expected to provide the DOJ with their own data on how the deal will affect insurance markets.

"The antitrust division makes the final decision on the competitive analysis but will take into account the information provided by the states," said Andre Barlow, an antitrust lawyer at Doyle, Barlow and Mazard PLLC, who's not involved in the inquiry.

The proposed acquisition comes after years of health insurance change driven by the politically divisive Affordable Care Act, often called Obamacare. Republicans say the new law has driven insurance costs higher and hurt consumers, while Democrats say it is insuring more people. Aetna and Humana have said that because the health insurance market is now more focused on consumers, being bigger will let them offer more competitive products.

When the nation's largest insurer, UnitedHealth Group, bought Nevada's Sierra Health Services in 2008, the Nevada Attorney General and the DOJ both filed antitrust complaints and signed off on a settlement requiring UnitedHealth to divest administration and sales of Medicare Advantage plans for seniors and the disabled in two counties.

In 2004, California's state regulator first rejected the acquisition of WellPoint Health Networks by Anthem. The companies challenged the move in court and eventually agreed to concessions, including putting $265 million towards California health projects that would benefit consumers.

The Humana purchase would create a company with more than 33 million customers in two-thirds of the United States. In individual states, their footprint is much bigger.

In a combined Medicare Advantage business, Aetna and Humana would have an 88 percent market share in Kansas, 80 percent in West Virginia, 58 percent in Iowa and 51 percent in Missouri, according to data from the Kaiser Family Foundation. In commercial insured plans, the new company would have more than a third of individual customers in Florida, Illinois and Kansas and 68 percent of Georgia, according to SG Cowen and SNL Financial.

Healthcare investors already have concerns over the Humana deal passing muster at the federal level, particularly after antitrust objections scuttled several other major transactions this year, including Sysco Corp's proposed purchase of US Foods and Comcast Corp's planned acquisition of Time Warner Cable Inc. They are also weighing the risk of another major health insurance merger being forged, possibly between Anthem Inc and Cigna Corp. In that case, antitrust authorities would have to account for the market effect of both deals when raising any objections.

The value of Aetna's cash and stock offer has dropped 10 percent since it was announced on July 3, as its share price fell over antitrust risk and other concerns. Aetna and Humana have said they view the regulatory process as "manageable," targeting a deal closing in the second half of 2016 to account for a lengthy review. Aetna and Humana both declined to comment on antitrust issues for this story.

STATE BY STATE

California Insurance Commissioner Dave Jones plans to talk to antitrust authorities and other states through the National Association of Insurance Commissioners about the Humana deal’s impact on California, where he sees even their combined 5 percent share as an issue.

"I will be raising whatever concerns I have on behalf of California consumers," Jones said in an interview. "I am generally concerned that historically health insurance company mergers have resulted in higher, not lower, premiums for consumers."

For example, insurance premiums rose 13.7 percent in Nevada in the year after UnitedHealth Group's acquisition of Sierra Health Services compared to health plans in a similar market that was not affected, according to a 2013 study published in the journal Health Management, Policy and Innovation.

In Kentucky, where Humana is based, Insurance Commissioner Sharon Clark said her department would work with federal regulators as they evaluate the transaction as well as conduct its own review, which could take six months to a year to complete.

Georgia state commissioner Charles Hudgens said in a statement he will perform an in-depth analysis of the proposed transaction's effect on competition in the state. Texas, Illinois and Florida said they are also awaiting filings from Humana.

State attorneys general may also look at the deal, but often don't disclose if they have opened an investigation.

In Connecticut, where Aetna is based, a spokesman for Connecticut Attorney General George Jepsen declined to comment on whether the office plans to probe the deal. "In Connecticut, the AG has the independent authority to look into mergers and to challenge them if it will lessen competition under the state's antitrust laws," Robert Blanchard said.

In Kentucky, where Humana is based, a spokesman for Attorney General Jack Conway said his office will look at the terms of the potential merger when they are released and determine if any action is necessary. In Florida, where Humana has 1.63 million customers, a spokeswoman for Florida Attorney General Pam Bondi said the state would look into the proposed merger for its effect on competition.