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Health Insurance Merger Lawsuit Considers Efficiencies Factor

The lawsuit against the health insurance merger between Cigna and Anthem started on November 21.

By Vera Gruessner

On Monday, November 21, the court trial filed by the Department of Justice against the health insurance merger between Anthem and Cigna began. The drive to stop the $48 billion health insurance merger started due to concerns over a negative impact on consumers, harm to provider reimbursement, and a decline of competition in the insurance market, according to The Coalition to Protect Patient Choice.

Health Insurance Acquisitions

The court case is expected to last until early January with Jon Jacobs, JD, making claims on behalf of the Department of Justice and Christopher Curran, JD, supporting the Anthem and Cigna health insurance merger. The opening arguments from Jacobs stated that the health insurance merger should be blocked based on the market shares of this consolidation.

Additionally, a focus on an increase in concentration due to the merger will be outlined in the court case as well as the possibility that market shares may even “understate the problem posed by this merger,” The Coalition to Protect Patient Choice reported.

Along with these arguments, Jacobs will be claiming how the health insurance merger would create a much more powerful company that would make it more difficult for providers to negotiate prices. The merger may lead providers to taking on lower reimbursements. On the side of the Department of Justice, another important point was made about the anti-competitive stance that this health insurance merger would pose on the market.

Curran pointed out an automatic exchange of savings available through one insurance product within the health insurance merger. Judge Amy Berman Jackson then asked whether market power would be beneficial for the efficiencies of the company or pose problems due to its anticompetitive nature.

READ MORE: Anthem Appeals Cigna Merger with Cost, Quality Arguments

Curran would be arguing on behalf of the efficiencies factor in the health insurance merger. In particular, he will detail the efficiencies of administrative services only plans, which are passed onto employers to cover employee healthcare costs. Nonetheless, the lawsuit must answer whether the insurance consolidation between Anthem and Cigna will harm consumers through increased premium costs or more restricted provider networks.

Another complicating factor for the health insurance merger comes in the form of Blue plans. A regulation requires Anthem and the Blue network to be linked. Exactly two-thirds of Anthem revenue must stem from its Blue plans. Anthem’s acquisition of Cigna will challenge the regulation surrounding these Blue plans.

Anthem also stated during the opening statements for the court case its desire to expand value-based care reimbursement and how its acquisition of Cigna would give it more leverage to advance alternative payment models. Greater power in negotiation will allow the payers to pass down automatic savings via value-based care or discounts, the defense said. Testimony is expected in the coming days from Anthem CEO Joseph Swedish and Cigna CEO David Cordani.

“Since announcing the transaction, Cigna has remained focused on delivering value to our clients and customers, building on our track record of strong financial results and growing our businesses in the U.S. and abroad,” a press release from Cigna stated this past summer.

“Cigna has remained strong by continuing to invest in innovative solutions to advance the goals of better health, affordability and personalized experience for our clients and customers and continuing to advance innovative approaches to care management, including expansion in collaborative value-based care arrangements with healthcare professionals across the care delivery spectrum, and designing effective health, wellness and engagement programs for our customers.”

READ MORE: Market Monopoly Cause of Court Blocking Cigna-Anthem Merger

The American Medical Association (AMA) released a statement regarding the lawsuit against the health insurance merger between Anthem and Cigna. AMA President Andrew W. Gurman, M.D., stated the risk to competition with these type of major consolidations within the medical insurance market.

Currently, 71 percent of the country’s metropolitan regions are facing a lack of competition within the insurance market. If the merger were to continue, payer competition within 121 metropolitan areas in 14 states would decline even further, Gurman stated.

“Competition and choice hang in balance as the court begins to weigh the impact of the proposed deal between Anthem and Cigna. This potential mega-merger is the latest in a series that has allowed a few publicly-traded companies to gain a stranglehold on commercial health insurance markets around the country,” Gurman said. “Lawmakers and regulators have a strong obligation to protect patients from a bad deal and foster more competition in health insurance markets. The AMA commends the DOJ and the bipartisan group of state attorneys general for their efforts to preserve competition and their strong commitment to enforce antitrust laws that prohibit harmful mergers.”

The future for this health insurance merger will depend upon the outcome of the Department of Justice lawsuit. The ruling may play a pivotal role for years to come in decisions among health insurers considering whether or not to invest in consolidations.

 

READ MORE: Anthem Pursues Cigna Merger Up to the Supreme Court

Dig Deeper:

How Health Insurance Mergers Could Change the Payer Industry

How Payers Should Prepare for Value-Based Reimbursement

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