Anthem-Cigna deal tightens CA health care market

by James Poulos | July 31, 2015 7:00 am

[1]Anthem has made public its plans to acquire Cigna, tightening further California’s already narrow market for health insurance. “In a deal that would create the nation’s largest health insurer by enrollment, Anthem announced Friday that it made a $48 billion bid for rival Cigna, which would cover about 53 million patients in the U.S.,” according[2] to the Los Angeles Daily News.

Bigger seen as better

The move was widely interpreted as reflecting an industry incentive under the Affordable Care Act to consolidate in order to leverage economies of scale. “The Affordable Care Act imposes limits on health insurers’ profits, so these companies view consolidation as the best way to lower costs and take advantage of rising revenues,” the Los Angeles Times noted[3].

But Anthem CEO Joseph Swedish insisting that the new mega-company was a win for consumers. “Going forward our new company will deliver an acceleration of innovative and affordable health and protection benefits solutions that help address our health system’s challenges and provide supplemental insurance protection, and health care security to consumers, their families and the communities we share with them,” he said.

With health costs continuing to climb upward, however, consumer groups questioned whether fewer choices and less attractive rates were around the corner. And California insurance commissioner Dave Jones told the Times “he doubts there will be any significant benefits from this round of mergers,” emphasizing that “increased consolidation has resulted in less competition and higher pricing.”

In a statement responding explicitly to the Anthem-Cigna merger, Jones expressed even greater skepticism. “California’s health insurance market already suffers from consolidation, with the four largest health insurers in the individual market controlling more than 85 percent of the market,” he said, the Daily News reported. “Further consolidation will result in even less competition among health insurers and will leave consumers and employers with fewer choices and the potential for greater premium increases. Studies of prior mergers of health insurers found that health insurance prices increased as a result of mergers.”

Mixed evidence

Defenders of the post-Obamacare regime in California argued that the projected rise in rates — a bit less than last year’s — ought to be read, along with the addition of new Covered California participants, as good news. “The average premium will rise 4 percent in 2016, a slight decrease from the 4.2 percent jump in 2015,” according[4] to the Associated Press, citing Peter Lee, the state exchange’s executive director. “Larry Levitt of the nonpartisan Kaiser Family Foundation said Covered California appears to be gaining momentum with several major insurers jockeying for market share and substantial enrollment. It’s unclear how the rest of the private market will look yet, he said.”

On the other hand, the 4 percent average has yet to be confirmed by regulators, and in large areas of the state, increases will be as much as twice as high. “On average, Northern Californians will see a 7 percent increase in 2016 premiums, compared with a 1.8 percent increase in the state’s southern half,” the Sacramento Bee reported[5], with some consumers poised for double-digit hikes. “An average 40-year-old individual in a midrange Silver plan will pay $384 in the state’s north versus $296 in the south, according to Covered California. In the four-county Sacramento region, where 78,000 individuals were signed up for coverage in 2015, the increase will be 8.2 percent.” Those figures reflected the limit of increased competition afforded by the entry of United Healthcare into the Northern California market, where its coverage area includes Amador, Butte, Calaveras, Sutter, Yolo and other counties, according to the Bee.

Meanwhile, the Bee observed[6], California families whose beneficiaries are spread across Medi-Cal and Covered California plans have encountered a daunting mix of bureaucracies that have yet to interface efficiently: “Health insurance agents, who have been responsible for a large percentage of Covered California enrollments and help consumers navigate the process, are nearly powerless to help their mixed-coverage clients.”

Source URL: https://calwatchdog.com/2015/07/31/anthem-cigna-deal-tightens-ca-health-care-market/

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