DMHC Must Require Consumer Protection Commitments in Anthem-Cigna Merger or Reject Plan If Companies Refuse, Says Consumer Watchdog

SANTA MONICA, Calif., March 4, 2016 /PRNewswire-USNewswire/ -- Consumer Watchdog today urged the Department of Managed Health Care (DMHC) to require Anthem and Cigna to commit to a series of consumer protections over prices and benefits to address the companies' past harmful practices, or reject the merger plan if the companies refuse.

Read Consumer Watchdog's letter to the DMHC: http://www.consumerwatchdog.org/resources/cwd_anthem_cigna.pdf

An American Medical Association analysis of 2015 health plan enrollment data shows that most population areas in California will suffer from reduced competition in the market if the merger is approved, and identifies nine metropolitan areas where the merger exceeds federal antitrust guidelines for preserving competition. California is one of only 17 states with areas where the merger is "presumed likely to enhance market power" under the federal measure. 

The metropolitan areas the data shows will be hardest hit include: Santa Cruz-Watsonville, Santa Ana-Anaheim-Irvine, Santa Barbara-Santa Maria, Salinas, Oxnard-Thousand Oaks-Ventura, Los Angeles-Long Beach-Glendale, Bakersfield, El Centro, and Modesto. The analysis uses a U.S. Department of Justice measure of market competitiveness called the Herfindahl-Hirschman Index and Department of Justice/Federal Trade Commission guidelines to measuring competition in mergers. See the report: www.bit.ly/21c52Gn

"Anthem has imposed hundreds of millions of dollars in unjustified rate increases on California consumers, been caught misleading consumers, and consolidation will only make it worse," said Carmen Balber, executive director of Consumer Watchdog. "DMHC should reject the merger if Anthem and Cigna refuse to make enforceable promises to protect Californians from enduring reduced services, higher premiums or bearing any costs of the merger. Anthem and Cigna should be forced to get better before being allowed to get bigger."

Anthem would leapfrog Kaiser as the largest health plan in California if the proposed merger is approved.

Consumer Watchdog called for: enhanced rate review to ensure the costs of the merger are not passed on to California policyholders; detailed disclosure of any revenues sent out of California to the parent company; a full review of provider networks pre-merger; a commitment that merger "savings" will not be achieved by reducing benefits; a commitment by the companies to hold rate increases to the rate of inflation for five years; and, a commitment to not impose rate increases deemed "unreasonable" by Department regulators. DMHC should reject the merger if the companies refuse to make these commitments to protect consumers, said Consumer Watchdog.

"Anthem and Cigna claim that their merger will increase competition, improve care and benefit consumers. Historically, healthcare mergers generally lead to the opposite: fewer choices, inadequate physician networks and higher premiums," Consumer Watchdog wrote in its letter to DMHC. "There is no evidence that mergers ever produce the benefit improvements or consumer savings promised by merging insurers."

"Cigna and Anthem have dismal records in California and across the country on rate increases, providing adequate provider networks and timely, fair patient service," the letter continued.

"Since 2013 Anthem has imposed $145 million in rate hikes deemed by regulators to be excessive and unjustified."

"Anthem has also failed to keep its promises to California policyholders about provider networks," in both its commercial and Medi-Cal business.

The letter said that conditions on the Anthem-Cigna merger should include:

• Enhanced Rate Review: To assure the public that savings from the merger are passed on but costs are not, DMHC must require the merged company to agree to five years of enhanced rate review. It must also enforce a binding agreement that the company will not implement rate hikes deemed unreasonable by California regulators.
• Bar "Upstreaming" of California Premiums to either Anthem or Cigna: DMHC should prohibit them from removing reserves from California to pay for severance and retention packages for executives in connection with the merger and require it to explain any "upstream" amounts sent out of state post merger.
• Improve Care: Anthem must be required to have adequate provider networks for all of its health plans, and submit a plan to correct past violations of benefit, claims and service obligations to its policyholders.
• Accountability: Any approval must include provisions requiring insurers' commitments to be tracked, measured, and enforced.

SOURCE Consumer Watchdog