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.

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 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, 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, 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.”

The attack on Anthem comes on the heels of similar breaches of data for Target, Home Depot and other companies.

Anthem President and CEO Joseph Swedish wrote in a letter to members:

“Anthem was the target of a very sophisticated external cyber attack. These attackers gained unauthorized access to Anthem’s IT system and have obtained personal information from our current and former members such as their names, birthdays, medical IDs/social security numbers, street addresses, email addresses and employment information, including income data. Based on what we know now, there is no evidence that credit card or medical information, such as claims, test results or diagnostic codes were targeted or compromised.

“Once the attack was discovered, Anthem immediately made every effort to close the security vulnerability, contacted the FBI and began fully cooperating with their investigation. Anthem has also retained Mandiant, one of the world’s leading cybersecurity firms, to evaluate our systems and identify solutions based on the evolving landscape.

“Anthem’s own associates’ personal information – including my own – was accessed during this security breach.”

CalPERS concern

In an email obtained by CalWatchdog.com, Rita L. Gallardo, division chief of CalPERS’ Office of Stakeholder Relations, wrote earlier today to those affected:

“As many of you have heard in the news, our health plan partner Anthem Blue Cross disclosed late last night that hackers breached its computer systems and the personal information of its members.  Like you, we are very concerned and frustrated about this unacceptable breach.  We have been in touch with Anthem this morning to ensure they are doing everything possible to protect our members and their families who are enrolled in the plan.”

Precautions

The hacker attack should not seriously affect Anthem members, whether or not they are part of CalPERS — provided people take precautions, Jim Harper told CalWatchdog.com; he’s a senior fellow in information studies at the Cato Institute.

He said that even if hackers obtain Social Security numbers, “it actually isn’t that serious because identity fraud takes a lot of work to pull off. When 80 million sets of ID are stolen, that doesn’t mean there will be 80 million incidents of identity fraud.”

The real risk now, he warned, is to make sure hackers don’t use the Anthem news itself as a way to trick people. As the Anthem and CalPERS statements quoted above indicate, members will be notified about the attack, and about what they can do.

Harper said people might get so tired of responding to legitimate inquires that, when a hacker inquiry pops up, they complacently could think, “Oh, not another one! All right, I’ll fill out the form and give them the information” — which then is use by the hacker for a serious security breach.

He urged Anthem members to change their passwords often to prevent identity theft. Which is good advice as well for those not part of Anthem, and for any system involving passwords.

CalPERS activism

CalPERS, the country’s largest retirement system, also is known for its shareholder activism, such as discouraging what it considers “excessive CEO pay” by companies. CalPERS maintains its activism helps improve company performance and is for the overall betterment of society.

Critics say such activism can reduce investment values, with the taxpayers who ultimately backstop CalPERS’ investments put on the hook for any shortfalls.

It’s too early to know, but Harper said the Anthem security breach might spark CalPERS’ activism in this area, in particular ensuring that “consumers have a right to know a breach has occurred. That sounds good. Yet it’s not necessarily good for consumers.”

He said that, given the ongoing security breaches, with more expected in the future, “If you hear about it all the time, it creates fear and unease, but not much more security.”

Instead, he reiterated that the best policy for consumers is constant vigilance over their own passwords and other data.