Antitrust Law Daily Wrap Up, ANTITRUST NEWS: American Hospital Association urges Justice Department to challenge Anthem-Cigna deal, (Apr 28, 2016)
Organizations Mentioned:American Hospital Association | Anthem | Anthem Inc. | Cigna | Cigna Corp.
By Greg Hammond, J.D.
The proposed merger between health insurance companies Anthem Inc. and Cigna Corp., if allowed to proceed, will allow the merged entity to substantially increase administrative fees and other charges and reduce levels of service for its Administrative Services Only (ASO) health insurance plans, the American Hospital Association (AHA) claims. The AHA sent a letter to Acting Associate Attorney General William Baer, urging the Justice Department to challenge the proposed deal.
The letter states that Anthem and Cigna have argued to the Justice Department that combing ASO plans presents relatively low antitrust risk, even in highly-concentrated markets, because health plans merely “pass through” provider costs to customers and do not have the opportunity to earn a profit on them, or on the financial risk associated with the customer’s medical claims. However, the AHA believes that, “Any notion that ASO health insurance contracts are somehow immune from the standard principles of supply and demand is inconsistent with market realities, basic economics and common sense.”
According to the AHA, combining the two insurance companies would create a $100 billion health insurance company with large shares of sales of ASO plans in highly concentrated commercial insurance markets in more than 800 geographic regions. Such a combination will likely increase ASO and other fees to access the network and reduce levels of service, the AHA maintained.
Anthem and Cigna’s efficiencies arguments—that the deal will allow them to negotiate lower prices with hospitals that will likely be passed through to purchasers of ASO plans—should also be rejected, the AHA argues. Any savings in reimbursement rates would likely be offset by higher network access fees, according to the letter. In addition, markets in which the health plans are highly concentrated can produce high entry barriers that result in higher health insurance prices for consumers, the AHA alleges.
Companies: American Hospital Association; Anthem Inc.; Cigna Corp.
News: Antitrust