Antitrust regulators worry about potential effects of health insurance merger
U.S. antitrust regulators are concerned that a proposed $48 billion merger between two of the largest health insurers in the nation -- Anthem Inc. and Cigna Corp. -- will compromise competition in the health care industry.
Earlier this month, officials from the Justice Department and over a dozen state attorneys general reportedly met with company representatives to discuss their concerns over the merger.
Groups representing physicians and consumers opine that if the plan gets approved, the merger could mean increased premiums for 53 million consumers across the country.
California regulators have announced that they will recommend that the Department of Justice prevent the merger.
“Generally, mergers in the health care industry don't appear to be creating any kind of innovation,” Yevgeniy Feyman, senior research assistant for the Harvard T. H. Chan School of Public Health, recently told Patient Daily. “Merging insurers will argue that they'll be able to keep down costs through their market power and deliver more integrated care to patients. The former is true, but research has consistently found that, nevertheless, these savings don't flow through to patients in the form of lower insurance premiums. The latter is an open question, though I'm skeptical.”
In some cases, companies planning to merge may obtain approval from the government by offering to sell assets or agreeing to other restrictions.
According to lobbying records, in 2015 alone, Anthem and Cigna spent over $13.6 million in lobbying efforts and hired 53 federal lobbyists, some of whom had worked in the Justice Department’s antitrust division.
Feyman, who is also an adjunct fellow at the Manhattan Institute, said that the most innovative thing insurers have brought in recent years are narrow networks, which he believes are not innovative enough to justify permitting the merger between insurance giants.
Whether the merger will affect consumers enrolled in the Connecticut Exchanges isn’t clear yet, Feyman said.
“On CT's exchange, ConnectiCare has a dominating market share, and Anthem is trailing in third place as far as I understand,” he said. “Unless Cigna has captured some significant share of the individual market in CT, this merger isn't likely to affect the exchange. That being said, if this merger leads to Anthem-Cigna entering the exchange more aggressively, it might result in a benefit if their plans are competitive.”
Adding more controversy to the proposed plan is a recent vote by state officials in Connecticut to launch a formal ethics inquiry into Connecticut Gov. Dan Malloy’s appointment of former Cigna lobbyist and insurance regulator Katharine Wade to head the state’s antitrust review of Cigna’s proposed multibillion-dollar merger with Anthem.
After the International Business Times reported the link between Cigna and Wade -- and large campaign donations from Cigna and Anthem to political groups affiliated with Malloy -- Connecticut Common Cause filed a petition requesting a ruling by the Citizen's Ethics Board in Connecticut on Wade’s potential conflict of interest.
Wade’s husband reportedly works for Cigna; her father-in-law is listed in court documents as representing the company; and her mother and brother have also worked for the insurer.
Feyman said it is hard to say whether Wade’s ties to the health care industry have influenced her decision-making in reviewing the proposal.
“Of course, we have to be careful of the revolving door,” he said. “That being said, regulators should have a strong understanding of or experience in the industry that they're regulating.”