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Consumers should pay attention to insurance antitrust case

Consumers should pay attention to insurance antitrust case

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On Monday, the U.S. Department of Justice will begin arguing its case against what it says is the largest merger in the history of the health insurance industry.

The Justice Department is challenging Anthem’s $54 billion acquisition of Cigna Corp., alleging that the deal will reduce competition among insurance carriers in dozens of markets, leading to increased market power for Anthem, which could lead to increased costs for consumers.

Health care economists agree this is a case area consumers should care about.

“Health insurance touches all of our lives, health care touches all of our lives, and we want to pay for value and not pay for market power,” said Erin Trish, a research professor at the University of Southern California’s Schaeffer Center for Health Policy and Economics.

And while many consumers are worried about rising premiums, Trish said, there’s research to show that premiums increase when there’s less competition among insurance carriers.

“Generally, our findings would suggest that they don’t pass those savings on to consumers,” Trish said of the insurers’ cost savings after a merger.

Some St. Louis area consumers would be harmed in the form of less competition after this particular merger, according to the Justice Department’s original complaint.

Anthem and Cigna compete to cover individuals and families through, a key component of the Affordable Care Act. In the two years Cigna has sold plans on the exchange in the counties around St. Louis, it has captured 25 percent of the individual market, “with much of that growth coming at Anthem’s expense,” according to the original complaint.

Tim Greaney, a former attorney with the Justice Department and health law expert, said larger insurers are able to command a discount from providers because they have more leverage due to their size, but they typically don’t pass along those savings to consumers in the form of lower premiums.

But Rep. Kevin Engler of Farmington, who wrote to the Missouri Department of Insurance in support of the merger, said the insurance companies need economies of scale to curb costs.

“We need to figure out how we increase competition, not lower it, and not artificially increase it by saying we all have to be in business,” he said of insurance companies.

Dave Overfelt, president of Missouri Retailers Association, who also wrote in support of the merger, said small businesses are feeling the pinch. He thinks a merger may help stem the increases.

Yet, Jason Turner, a former controller with Cigna in Utah and now a professor at St. Louis University, said in the next few years he expects to see big shifts in provider networks, especially if these mergers go through.

He said insurers will no longer seek to have vast networks that include many area providers, even for large employer-sponsored health plans.

“Historically, that’s not how you extract the largest discounts,” Turner said.

Instead, he expects insurance companies, especially those with more leverage, to secure a lower rate with one major health system and then exclude in-network access to competitors. This is already happening in the individual market. Anthem contracts with SSM Health but excludes BJC HealthCare, the opposite is true of Cigna’s local individual network, which favors BJC. This also raises concerns for providers who worry insurance carriers with too much leverage will drive reimbursement to a level that isn’t profitable for them.

On Monday, the Justice Department will first try to convince a federal judge that a reduction in competition for “national accounts” alone is enough to stop the merger, according to pretrial briefs.

Greaney said the Justice Department will try to show that large employers looking to provide insurance coverage to their employees all across the country will now have fewer choices.

However, Anthem contends that the Justice Department is imprecise in its argument; meaning the Justice Department hasn’t properly defined the national accounts or the market for them, an important test in antitrust cases.

This will not be the only major antitrust case for health insurance industry. Aetna Inc. is seeking to acquire Humana Inc. for $54 billion and the Justice Department is seeking to block that deal, too.

If these deals were to go through, it would mean the nation’s top five insurance carriers would be reduced to just three.

Samantha Liss • 314-340-8017

@samanthann on Twitter

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