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How Blue Cross Health Plans Affect Anthem-Cigna Merger Lawsuit

In the Anthem-Cigna merger lawsuit, the defense claims that Blue Cross health plans are able to compete against each other. The Department of Justice states otherwise.

The Anthem-Cigna merger lawsuit has brought significant evidence to light ever since the case began on November 21, 2016. The Department of Justice has been able to illuminate that the health insurance merger would create major market concentration when selling health plans and services to large employers, according to Health Affairs.

Health Insurance Merger

On the other side of the argument, the defendants in the Anthem-Cigna merger lawsuit claim that large cost savings would be gained from the consolidation when the insurer works with hospitals and physician practices. However, a lack of clarity still exists as to whether the cost savings would offset the potential problems of greater market concentration.

Merger’s impact for competition on national scale

Judge Amy Berman Jackson had considered whether the alleged reduced competition in the market among national accounts could grant an injunction stopping the health insurance merger in its tracks. Judge Jackson stated that the potential for an injunction is still on the table regarding the national accounts factor. However, the second phase of the trial has begun, which centers on the Department of Justice claim that local competition in 35 markets would be negatively impacted by the combined market power of Cigna and Anthem.

There were some discrepancies from the national accounts market issue such as the Department of Justice including nationwide employers who have employees in as few as two states, Health Affairs reported. Additionally, the majority of these employers are actually self-insured, which means the companies may not affect the market concentration of the Anthem-Cigna merger. However, the self-insured employers still rely on payers to negotiate contracts with hospitals and physician groups, offer wellness and care management programs, and conduct administrative work.

Competition of Blue Cross health plans

One interesting aspect of the Anthem-Cigna merger lawsuit deals with the Department of Justice claim that only four health insurers serve on a national scale: Aetna, UnitedHealthcare, Cigna, and the Blue Cross network, with Anthem as its largest member. However, the defense for the Anthem-Cigna merger lawsuit allege that the Blue plans actually compete amongst themselves and that other competitors make an impact on keeping pricing in the market fair.

When it comes to the potential competition or lack thereof between Blue Cross health plans, the Department of Justice argued that the requirements for Blue Cross Blue Shield members allow them to compete as a single health plan countrywide. Blue health plans are not allowed to compete in the same territories using a Blue plan label, Health Affairs reported.

“The Blues’ rules (which are themselves being challenged in a private antitrust class action) further limit competition because they would constrain the ability of Cigna to compete as a non-Blue plan,” Thomas Greaney, JD, is Professor of Law and Co-Director of the Center for Health Law Studies at Saint Louis University School of Law, wrote for Health Affairs.

“To remain eligible to use the Blue Cross and Blue Shield names and symbols Anthem may not derive more than one third of its national revenues from non-Blue brands — a level that the acquisition of Cigna plans would cause it to exceed unless it ‘rebranded’ those plans. The government’s economic expert took what he described as a conservative approach by including some 26 regional carriers in his market data calculations and found presumptively illegal levels of concentration resulting from the merger.”

The Cigna-Anthem merger lawsuit is expected to come to a conclusion this January. On the side of the Department of Justice, Jon Jacobs, JD, has argued that the health insurance merger would bring too much power to the consolidated insurer, which would make it challenging for providers to negotiate prices.

Hospitals and physician practices may end up with lower reimbursement rates than previously if the health insurance merger is allowed to proceed. Jacobs has also detailed the risks that the alleged anti-competitive stance of the merger could bring to the health insurance market.

Efficiencies factor for health plans

On the defense side, Christopher Curran, JD, argued that the efficiencies factor from the health insurance merger would make the consolidation beneficial to consumers and the market as a whole. The efficiencies factor relates to administrative services only plans. The cost savings of these administratives services only plans would then be passed to employers to manage employee healthcare spending.

“Competition and choice hang in the balance as the court begins to weigh the impact of the proposed deal between Anthem and Cigna,” Andrew W. Gurman, M.D., President of the American Medical Association, said in a public statement.

Over the next several weeks, the two sides will make their final case in the Anthem-Cigna merger lawsuit. Judge Jackson will need to decide whether or not the health insurance merger between Anthem and Cigna should proceed.

 

Dig Deeper:

How Health Insurance Mergers Could Change the Payer Industry

How Payers Could Succeed in ACA Health Insurance Exchanges

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