SANTA MONICA, Calif., June 16, 2016 /PRNewswire-USNewswire/ -- The U.S. Department of Justice should adopt today's recommendation by California Insurance Commissioner Dave Jones and reject the proposed $50 billion merger of health insurance giants Anthem and Cigna, said Consumer Watchdog. Consumer Watchdog urged Commissioner Jones to reject the merger in testimony at a March Department of Insurance hearing.
"An Anthem-Cigna merger would mean higher prices, reduced benefits and fewer choices for consumers in a market that is already squeezed as thin as it can go. The U.S. Department of Justice should reject this $54 billion merger that is about padding health insurers' profits, not improving consumers' health care," said Carmen Balber, executive director of Consumer Watchdog.
At its March hearing, the Insurance Commissioner asked Anthem and Cigna to provide an accounting of the more than $2 billion in savings the insurance companies claimed the merger would provide, and identify what portion of those savings would be passed on to consumers. The companies failed to provide this evidence. In fact, their response to the Department of Insurance did not even acknowledge the question.
"Anthem cannot provide proof of savings, or any benefits to consumers from this merger, because there will be none if the merger is approved," said Balber.
Since 2013, Anthem has imposed at least $145 million in rate hikes regulators found to be unreasonable but did not have the power to stop. Insurance Commissioner Jones wrote of Anthem's unjustified rate increases to the U.S. Department of Justice: "This history convinces me that if the merger were permitted, Anthem would not only fail to pass along to insureds any savings that might result, but would use its enhanced market power to extract more and greater unreasonable premium increases."
The Department of Insurance found the merger was likely to reduce competition in 41 of 58 California counties. Anthem's share of the self-insured market would also increase, to 61%, meaning higher costs and less options for large companies that pay Anthem or Cigna to administer their health plans and employ nearly 4 million Californians. Less competition inevitably leads to price hikes and benefit reductions as health insurers wield new market power, said Consumer Watchdog.
Anthem's merger history in California also helps make the case for scuttling the deal, said Consumer Watchdog. In 2004, former Insurance Commissioner John Garamendi exacted significant concessions before allowing the merger of Wellpoint and Anthem to proceed. Nevertheless, over the next decade, Blue Cross of California sent $5.4 billion in California policyholder dollars out of state to its parent company, even as it was raising premiums year after year. In 2010, it was Blue Cross of California's outrageous proposal to raise rates up to 89% that was responsible for jumpstarting the legislation enacting the Affordable Care Act.
If the Anthem-Cigna merger proceeds, the merged company would surpass Kaiser to become the largest insurer in California.
Read Consumer Watchdog's letter opposing the merger: http://www.consumerwatchdog.org/resources/cwdcdianthem.pdf
Find Consumer Watchdog online at www.ConsumerWatchdog.org
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SOURCE Consumer Watchdog