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Proposed Anthem-Cigna Merger Under Fire from CA Consumers

News  |  By Doug Desjardins  
   April 05, 2016

The merger "would create the nation's largest insurer, which could have a significant impact on California's consumers, businesses, and the healthcare marketplace," says on consumer advocate. But few studies show "higher insurer market concentration leads to lower health insurance premiums," according to health economist.

This article originally appeared in California Healthfax.

A proposed merger between insurers Anthem Inc. and Cigna Corp. drew fire from consumer advocates who say the merger would give Anthem too much market share and potentially lead to higher premiums.

Both proponents and critics of the proposed $54 billion merger spoke at a March 29 public hearing in Sacramento convened by the state Department of Insurance. Executives from Anthem and Cigna said the merger would create a larger and more efficient company that would have more leverage with providers and could lead to more affordable premiums. Consumer advocates questioned those claims and suggested the merger would likely lead to higher rates and fewer choices for consumers.

State Insurance Commissioner Dave Jones said he would issue his decision on whether to approve the merger "in the coming weeks."

"This merger would create the nation's largest insurer, which could have a significant impact on California's consumers, businesses, and the healthcare marketplace," said Jones. "I am considering what is best for consumers and the overall marketplace. Anthem and Cigna bear the burden of demonstrating this proposed merger is in the best interest of California consumers and the health- care marketplace."

Brent Fulton, PhD, MBA, assistant adjunct professor of health economics and public policy at UC Berkeley, presented an analysis of the proposed merger. He agreed the merger could give Anthem and Cigna more negotiating power with providers, which could theoretically lead to lower healthcare costs. But he added that there are few studies that show "higher insurer market concentration leads to lower health insurance premiums."

Consumer advocates and the American Medical Association (AMA)    were skeptical about claims that the merger would lead to lower premiums and some groups urged Jones to reject the merger. Health Access California noted that Anthem was fined by the state of California in 2015 for having inaccurate provider directories and has a "troubling record of not meeting its obligations to its customers."

"The Anthem-Cigna merger is the most troubling of the insurance megamergers in California and nationally," said Tam Ma, policy counsel for Health Access California. "Anthem provides coverage for millions of consumers, yet has a record of not meeting basic consumer protection laws. Anthem should not be allowed to get bigger unless it gets better."

The AMA suggested the proposed merger could violate federal antitrust laws in some urban areas of California and recommended that state officials reject the merger proposal.

"California should act to block this harmful merger and foster a more competitive marketplace that will operate in patients' best interests," said Henry Allen Jr., an antitrust attorney with the AMA. "The consequences of the proposed merger would have negative, long-term consequences for healthcare access, quality, and affordability in California."

Consumer advocacy group Consumer Watchdog said the merger will result in "higher prices, reduced choice, and compromised services" for consumers. "It's no longer believable to claim that making the few insurance industry giants larger could benefit consumers," said Carmen Balber, executive director of Consumer Watchdog. "The only action that truly protects California policyholders is for the Department of Insurance to reject the Anthem-Cigna deal."

The $54 billion merger would increase Anthem's membership from 38 million to 53 million members nationwide. In California, the combined membership of Anthem Blue Cross and Cigna would make it the largest insurer in the state with more than 8 million members.

"Anthem and Cigna have limited overlap in a highly competitive industry and together will be in a better position to improve consumer choice and quality," said Anthem Blue Cross spokesperson Darrel Ng. "Additionally, we will be better able to manage the cost drivers that negatively impact affordability for consumers."

State insurance officials approved a $6.8 billion merger between Health Net of California and St. Louis, MO-based Centene Inc. earlier this month and approved a merger between Blue Shield of California and Care1st Health Plan last October.

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