San Francisco, California - The American Medical Association (AMA) testified Tuesday before the California Department of Insurance in opposition of the proposed acquisition of Cigna by rival Anthem, warning regulators that the merger amounts to a grab for anticompetitive market power that threatens California’s health care delivery system.
The AMA opposes Anthem’s goal of dominating the California health insurance market by purchasing Cigna - the state’s sixth largest insurer. The AMA presented state regulators with an analysis that found the proposed Anthem-Cigna merger would run afoul of federal antitrust guidelines in highly-populated metropolitan areas across California.
“California should act to block the harmful merger and foster a more competitive market place that will operate in patients’ best interests,” said Henry Allen, the AMA’s top antitrust attorney. “The state’s fragile health care system should not be left vulnerable to a giant health insurance company with anticompetitive market power. The consequences of the proposed merger would have negative long-term consequences for health care access, quality and affordability in California.”
The AMA noted that health insurer consolidation compromises the ability of physicians to advocate fo their patients. In practice, market power allows insurers to exert control over clinical decisions, which undermines the patient-physician relationship and eliminates crucial safeguards of patient care. Competition among health insurers, on the other hand, can lower premiums, enhance customer service, and spur innovative ways to improve quality while lowering costs. Patients benefit when they can choose from an array of insurers who compete for their business by offering desirable coverage at competitive prices.
“Competition, not consolidation, is the right prescription for California’s health insurance markets and underscores what is ultimately at stake: the health and safety of the state’s patients,” said Allen. “The physician role as patient advocate is undermined as large health insurers replace clinical judgement with corporate policy. Conditions in most markets are now heavily tilted toward insurers, giving them an unprecedented advantage in determining the scope, coverage and quality of health care."
The AMA noted that in California, where most markets are dominated by Anthem, there are high barriers for new competitors to enter these markets. Potential competitors are typically unable to challenge Anthem’s market dominance due to the insurer’s entrenched position. Allowing Anthem to enhance its market power through the Cigna acquisition would represent an insurmountable barrier for new insurers to expand to California markets and offer competitive choices to patients.
“Anthem has been unable to produce evidence to support its claim that the merger guarantee greater efficiency and lower health care costs, said Allen. “To the contrary, economic studies have shown that rather than passing any benefits from efficiencies to consumers, health insurer mergers actually result in higher premiums.”
The proposed merger between Anthem and Cigna highlights a significant lack of health insurer competition that already exists in two-thirds of California’s metropolitan areas. These markets are rated "highly concentrated" based on federal guidelines. The U.S. Department of Justice has recognized that patient interests can be harmed when a big insurer has a stranglehold on a local market.