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California Insurance Commissioner joins organizations speaking out against health insurance mergers

Brian Anderson

The number of organizations speaking out against the proposed Anthem-Cigna and Aetna-Humana health insurance mergers continues to grow, casting some doubt on whether the U.S. Department of Justice will eventually approve one or both of the controversial mergers.

If four of the top five health insurers are allowed to consolidate into two combined health insurance companies, critics of the deals say they would lead to a complete transformation of the market, meaning higher premiums, reduced benefits and less competition that would all be harmful to consumers.

The American Medical Association, the Coalition to Protect Patient Choice, Consumer Watchdog, the American Antitrust Institute and the American Hospital Association among those on record as being against the mergers.

California Insurance Commissioner Dave Jones recently urged the Justice Department to block the merger of Anthem Inc. and Cigna Corp., declaring the $54-billion deal anti-competitive and harmful to consumers. His recommendation could carry considerable weight as the Justice Department determines whether to grant federal antitrust approval to the deal.

There are 25 states that have laws requiring their insurance commissioners to evaluate the mergers’ potential effects within their jurisdiction, and if just one in a populous state fails to approve the mergers, the deals could be derailed.

The Justice Department could also seek divestitures to reduce market power or try to block the merger entirely on antitrust grounds. Anthem said it has received approval from 12 states so far, but other reviews are pending. Jones is the first state insurance regulator to formally oppose the Anthem-Cigna deal. Jones hasn’t issued a recommendation yet on the Aetna-Humana merger.

Consumer advocate group Consumer Watchdog this week applauded Jones for his stance on the issue. “An Anthem-Cigna merger would mean higher prices, reduced benefits and fewer choices for consumers in a market that is already squeezed as thin as it can go. The U.S. Department of Justice should reject this $54 billion merger that is about padding health insurers’ profits, not improving consumers’ health care,” said Carmen Balber, executive director of Consumer Watchdog.

At its March hearing, Jones asked Anthem and Cigna to provide an accounting of the more than $2 billion in savings the insurance companies claimed the merger would provide, and identify what portion of those savings would be passed on to consumers. The companies failed to provide this evidence. In fact, their response to the Department of Insurance did not even acknowledge the question, Consumer Watchdog noted in a press release this week.

“Anthem cannot provide proof of savings, or any benefits to consumers from this merger, because there will be none if the merger is approved,” said Balber.

Since 2013, Anthem has imposed at least $145 million in rate hikes regulators found to be unreasonable but did not have the power to stop. Jones wrote of Anthem’s rate increases to the U.S. Department of Justice: “This history convinces me that if the merger were permitted, Anthem would not only fail to pass along to insureds any savings that might result, but would use its enhanced market power to extract more and greater unreasonable premium increases.”

The Department of Insurance found the merger was likely to reduce competition in 41 of 58 California counties. Anthem’s share of the self-insured market would also increase, to 61%, meaning higher costs and fewer options for large companies that pay Anthem or Cigna to administer their health plans and employ nearly 4 million Californians. Less competition, Consumer Watchdog said, inevitably leads to price hikes and benefit reductions as health insurers wield new market power.

Anthem’s merger history in California also helps make the case for scuttling the deal, said Consumer Watchdog. In 2004, former Insurance Commissioner John Garamendi exacted significant concessions before allowing the merger of Wellpoint and Anthem to proceed. Nevertheless, over the next decade, Blue Cross of California sent $5.4 billion in California policyholder dollars out of state to its parent company, even as it was raising premiums year after year. In 2010, Consumer Watchdog said it was Blue Cross of California’s “outrageous” proposal to raise rates up to 89% that was responsible for jumpstarting the legislation enacting the Affordable Care Act.

If the Anthem-Cigna merger proceeds, the merged company would surpass Kaiser to become the largest insurer in California.

The American Medical Association is concerned that the health insurance mergers will lead to declining patient care and provider reimbursement, according to a recent article in HealthPayer Intelligence. The article says the American Hospital Association stated in a letter to William Baer, the Assistant Attorney General for the United States Department of Justice Antitrust Division, that the mergers may hurt competition in the health insurance market and pose too many barriers for other payers entering the market.

Leavitt Partners also conducted a study that details which states will see the biggest payer concentration or consolidation due to the Anthem-Cigna and Aetna-Humana health insurance mergers. For instance, the states Ohio, Kansas, Alaska, and Iowa are expected to see a 60% increase in the Medicare Advantage concentration, the article says.

• Read Consumer Watchdog’s letter opposing the Anthem-Cigna merger here:http://www.consumerwatchdog.org/resources/cwdcdianthem.pdf



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