The move signals potential for greater premium increases, cautions California's insurance commissioner.
The proposed merger between Anthem Blue Cross and Cigna is expected to draw heavy scrutiny from federal agencies but isn't likely to significantly change the health insurance landscape in California.
The latest entry in a wave of mega-mergers between insurers came July 26, when Anthem announced it would acquire Cigna in a deal worth an estimated $54.2 billion with debt factored in. The deal would make Anthem the largest insurer in the country based on total enrollment. The combined company would have about 53 million covered lives in the United States if the deal closes as scheduled in the second half of 2016. Regulatory approval is pending.
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California Insurance Commissioner Dave Jones has expressed concerns about further consolidation among insurers in the state and says the state Department of Insurance will review the proposed merger.
"California's health insurance market already suffers from consolidation, with the four largest health insurers in the individual market controlling more than 85% of the market," he says. "Further consolidation will result in even less competition among health insurers and will leave consumers and employers with fewer choices and the potential for greater premium increases."
According to a 2014 report from the California HealthCare Foundation, the top insurer in the state is Kaiser Permanente with a 42% share of the private market followed by Anthem with 20% and Blue Shield with 15%. Cigna ranked seventh with a 4% share. Though the merger between Anthem and Cigna would make Anthem a larger player in the California market, it would not increase its market share dramatically.
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"Cigna does not have a big market share in California, so this proposed merger is not going to change the landscape that much in the state," says Gerald Kominski, director of the UCLA Center for Health Policy Research. "If effectively means the combination of a small player (Cigna with about a 4% market share in California in the private market) with a big player (Anthem with about a 20% market share in the private market)."
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While the impact in California would not be dramatic, the deal is likely to raise concerns in other states where Cigna and Anthem both have a large share of the market. "The implications nationally may result in less competition in markets and is thus likely to generate more regulatory scrutiny, especially given the size of the combined company," Kominski says.
Tam Ma, policy counsel for healthcare advocacy group Health Access California, says the deal could be bad for consumers. "Anthem should not be allowed to get bigger without getting better," says Ma. "Anthem has pursued rate increases that California regulators found to be unreasonable and its provider directories are inaccurate and unreliable, making it difficult for consumers to find in-network doctors who are accepting new patients.