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This morning, health insurance giant Anthem dropped its troubled bid to take over one of its top competitors, Cigna. A February district court decision to block the proposed merger on anti-trust grounds was recently upheld by the DC Circuit Court of Appeals, but with Anthem’s decision today, this anti-competitive takeover bid is finally laid to rest. This development comes after months of work by PennPIRG and a broad coalition of consumer and health care groups, urging close scrutiny of the merger from state and federal regulators and raising questions and concerns about the potential impact on consumers.
The failure of this merger bid is critical for ensuring competition in health insurance markets, which is especially important in light of some insurers dropping coverage in some parts of the country over the past year. When markets are uncompetitive, health insurers are less likely to push hard to keep down costs, improve care and improve customer service. When consumers have fewer options, those options tend to be worse and more expensive. Had this merger gone through, health insurance market competition across the country would have been substantially reduced.
In making the case for the merger, Anthem argued that consolidation would benefit consumers by enabling these health insurers to cut costs through administrative efficiencies, and by pushing a harder bargain with health care providers. Unfortunately, there’s no evidence that bigger is better when it comes to health insurance. Past insurance mergers have generally led to higher, not lower premiums, and research has shown that large insurers tend to hike premiums even more than their smaller competitors.
Although it makes sense that a larger insurer would be able to negotiate lower prices with health care providers, the problem is that health insurers generally haven’t shared those savings with their members. If big health insurers were held accountable for keeping their rates reasonable and sharing cost savings with their members, mega-mergers would be less concerning for consumers. But without such assurances, major health insurance mergers should be met with skepticism at best.
We applaud this positive result for consumers and urge regulators to continue their close scrutiny of consolidation in health care.
 See, e.g., Wang E & Gee G. “Larger Issuers, Larger Premium Increases: Health insurance issuer competition post-ACA.” Technology Science, August 11, 2015. Available at http://techscience.org/a/2015081104/index2.php
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