California Insurance Commissioner Proposes Halt to Anthem-Cigna Merge

The California Insurance Commissioner urged federal officials to halt the proposed merger of insurance companies Anthem, Inc, and Cigna Corporation as it would severely raise consumer costs.

Commissioner Dave Jones, Jones reports to federal officials, Loretta E Lynch, Attorney General and Renata B. Hesse, Principal Deputy Assistant Attorney General, that the $54-billion merger would likely result in higher costs for consumers, fewer health coverage choices and also providing lower quality of medical care.

Jones said at a press conference, “I urge the Department of Justice to use its authority to block the Anthem and Cigna merger because of its anti-competitive effects.”

It is reported that Anthem received approval from 12 states with other pending reviews. Jones reported he is the first state to formally oppose the merger with Anthem. However, the Department of Managed Health Care, California’s other insurance regulator, is still reviewing the merger, as well as Connecticut. Connecticut’s approval is critical as Cigna is based there.

Insurers argue that their merger will, in fact, eliminate unnecessary costs, but Jones rejects Anthem’s argument and says its claim of $2 billion in savings is “not credible.” Jones says that if Anthem and Cigna merge, the two companies would have roughly 61% of the California employer market.

Carmen Balber, Executive Director of Consumer Watchdog, a Santa Monica-based advocacy group, says that, since 2013, there has been $145 million in rate hikes in California imposed by Anthem Blue Cross.

If Anthem adds Cigna, Anthem’s market share would exceed 50% in 28 of California’s 58 counties.

Anthem-Cigna is not the only proposed company merger. Aetna Inc and Humana Inc have proposed to merge meaning the U.S. health insurance market would go from five major players down to three. Jones hasn’t released a decision on additional mergers, but some big employers nationwide are worried about having fewer competitors to choose from.

References:

Jones, D. Proposed merger of Anthem Inc. and Cigna Corporation [letter]. Insurance.ca.gov. June 16, 2016.