CA Insurance Dept. Should Reject Anthem-Cigna Merger That Will Harm Consumers, Says Consumer Watchdog

SAN FRANCISCO, March 29, 2016 /PRNewswire-USNewswire/ -- Consumer Watchdog today called on Insurance Commissioner Dave Jones to reject a proposed merger of Anthem and Cigna that will severely restrict competition in California and is expected to cause health insurance price increases and benefit reductions for 16.8 to 33.3 million Californians.

Read Consumer Watchdog's letter here: http://www.consumerwatchdog.org/resources/cwdcdianthem.pdf 
View a map of the California areas hardest-hit: http://www.consumerwatchdog.org/sites/default/files/anthemcignamergermap.png 
The Department of Insurance hearing into the merger can be watched here: www.insurance.ca.gov

"Insurance industry consolidation has gone too far in California, costing consumers in the form of higher prices, reduced benefits, narrower networks and fewer choices," said Carmen Balber with Consumer Watchdog. "It is no longer believable to claim that making the few insurance giants larger could benefit consumers. It's time to draw a line in the sand. The only action that truly protects California policyholders is for the Department of Insurance to reject the Anthem-Cigna deal."

Nine metro areas in California will be among the hardest-hit in the nation if the merger is approved, and nearly every major population center in the state could be affected, according to an American Medical Association analysis using federal merger guidelines.

In 9 California metro areas with a population of 16.8 million people the merger is "likely to enhance market power" according to the Department of Justice/Federal Trade Commission merger guidelines. This means companies are expected to raise price, reduce output, diminish innovation, reduce product quality, variety or service, or otherwise harm customers. In another 6 metro areas with 16.5 million people the merger will "potentially enhance market power," with all of the same harmful outcomes for consumers.  A total 33.3 million people in cities including San Francisco, Los Angeles, Sacramento and San Diego could be affected.

If the Anthem-Cigna merger proceeds, Anthem will gain a near-monopoly in the self-insured market. It will double its share to 69% of the market, 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. A merged Anthem-Cigna would surpass Kaiser to become the largest insurer in the state.

Consumer Watchdog wrote that regulators cannot exact enough concessions from the companies to protect consumers from the negative impacts of an Anthem-Cigna merger. However, it recommended specific requirements if the Department still considers approval. These include protections on:

Unreasonable Rates & Wall Street

• Anthem should commit to not implementing rate hikes that regulators find to be unreasonable.  
• Anthem should be prohibited from upstreaming profits to its parent company while at the same time increasing premiums on California policyholders. 
• Anthem should be required to disclose details of any administrative services payments to its parent company out of state, to allow the public to gauge whether such payments are made at fair rates or are inflated to hide upstreaming of California policyholder money to shareholders. 

Executive Compensation

• Anthem should be prohibited from removing reserves from California or otherwise requiring California policyholders to pay for severance, retention or other compensation packages for executives in connection with the merger.

Networks

• Anthem should immediately submit its provider networks to review for compliance with Department of Insurance network adequacy regulations.
• Anthem should commit to expanding network size for all plans that give consumers access to less than 50% of providers in the area. 

Public Accountability

• Anthem's filings with the Department of Insurance to prove its compliance with these undertakings should be public documents. Grants of confidentiality should only be allowed sparingly, with explanation of the sensitive nature of the withheld documents, if at all.  
• Anthem should be subject to steep penalties for violating any provision of these undertakings, and revocation of approval if there is a pattern of violations. 

Find Consumer Watchdog online at www.ConsumerWatchdog.org

SOURCE Consumer Watchdog