Execs Can't Explain How Consumers Benefit From Anthem-Cigna Merger

Yesterday in San Francisco, Anthem VP Jay Wagner and Cigna’s Tom Richards refused to commit to price reductions for California consumers if the $54 Billion deal for Anthem to buy Cigna is approved.

In fact, Anthem and Cigna’s executives could not provide any concrete examples of how the Anthem-Cigna merger would benefit consumers at the four-hour hearing into the merger I attended at the Department of Insurance.

I called on Insurance Commissioner Dave Jones to reject the deal.

The sentiment was echoed by every other consumer and provider group that appeared to testify.  Jones too noted that he approaches the deal with “skepticism” and peppered the companies with pointed questions about how aspects of the deal will impact consumers and employers, and what savings consumers should expect.

The execs couldn’t tell him.   

For example, Anthem’s pitch to Wall Street touts $2 billion in annual “synergies” as a result of the deal, and credits “network efficiencies and medical management” as key to achieving these anticipated savings.

When companies say “network efficiencies” or “medical management” we hear “reduction in networks” and “denial of necessary medical care.”

At the same time, Cigna has been promoting “enhanced” and “premier” networks as a consumer benefit from the deal.  

Jones pressed the companies to explain how it expected to save money on networks without reducing their size or scope, and how much savings consumers should expect to see.

Wagner and Richards had to acknowledge that the $2 billion was little more than an estimate for Wall Street. Even while claiming all of the savings from “network efficiencies” would inure to consumers, they couldn’t provide any real numbers on savings, or how the networks would become more efficient.

Most of their pitch relied on the claim that merging would enable the companies to more quickly and effectively enact “value-based” approaches to care. “Value-based” is a top shelf buzz word right now, because it represents the push away from paying for quantity of services billed by providers to payment based instead on a patient’s health outcomes. Emphasizing quality over quantity is expected to improve health and save money. But Wagner and Richards could not explain why the companies needed to merge to make that happen. I would expect the opposite: That the most innovative solutions on value-based care would come from companies forced to compete in the market, not after reducing competition by eliminating Cigna as a competitor.

If the merger were approved, Anthem would leapfrog Kaiser to become the largest health insurance company in California, and surpass UnitedHealthcare to become the largest health insurer nationally. With 4 companies already controlling 83% of the commercial market in California, we cannot afford to lose Cigna, our 5th largest player. 

Large employers that self-insure account for nearly 20 percent of insured Californians. Anthem and Cigna control nearly equal portions of this market, and the merger would double Anthem’s share. Prices will inevitably go up for this group of large employers whose ability to shop around for competitive prices will be cut in half.

And in 15 California metro areas, population 33.3 million, the merger is expected to increase Anthem’s power in the market under federal merger guidelines. This means companies are expected to raise price, reduce output, diminish innovation, reduce product quality, variety or service, or otherwise harm customers.

For the companies, this deal is about one thing – the $115 Billion in annual revenues that Anthem is touting to Wall Street if the merger is approved.

Californians can’t weather the price hikes and reductions in benefits, services and choices, that are inevitable if Anthem is allowed to buy Cigna. That’s why we’ve asked the Insurance Commissioner to reject the deal.

 

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