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AMA study: Anthem-Cigna merger significantly reduces insurance competition in N.H.

Last modified: 9/13/2015 12:23:48 AM
The merger of Anthem and Cigna – two of the largest health insurers in New Hampshire – has prompted a call for close scrutiny from the American Medical Association, which warns that the move will substantially reduce competition here and elsewhere.

Based on a newly released analysis of the merger’s effects, the AMA has cautioned that reduced competition could result in higher costs for patients and other adverse consequences for health care providers. Yet Anthem maintains the merger has the potential to reduce costs and ultimately enable the company to be more efficient.

Anthem announced plans to acquire Cigna in July. Together, the two companies would cover about 53 million people in the United States, according to the Associated Press – making the merged entity the nation’s largest health insurer.

In New Hampshire, the merger between Cigna by Anthem represents a combination of the two top commercial (non-government) health insurance providers in the state, according to Insurance Department Spokeswoman Danielle Barrick.

According to the AMA’s analysis, New Hampshire is poised to see one of the largest increases in market power as a result of the merger as measured by the Herfindal-Hirschman Index (a unit used to indicate market concentration, also referred to as HHI).

When looking at HMO, PPO and POS markets combined, market power increased from an HHI of 2,769 before the merger to 4,452 after the merger, according to the AMA’s analysis. (Areas with HHI values of more than 2,500 are considered to be “highly concentrated,” as noted by the AMA.)

The AMA also projects that the merger will reduce competition levels by more than 50 percent in several markets within New Hampshire – in the Rochester-Dover, Manchester and Nashua areas.

In an announcement about the findings, AMA President Steven Stack warned, “A lack of competition in health insurer markets is not in the best interests of patients or physicians.” The AMA, Stack said, is pushing state and federal officials to give the merger close scrutiny.

New Hampshire insurance officials will coordinate with those in other states on a “large-scale review” of the acquisition in the year ahead, Barrick said.

“The New Hampshire Insurance Department has the authority to review acquisitions that involve insurance companies domiciled in the state,” Barrick explained. “In New Hampshire, the Department’s authority extends to a small subsidiary of Cigna, which does not currently write any coverage.”

A public hearing to address market concentration and other aspects of the merger is expected to take place in New Hampshire as part of that larger review process, Barrick said. More details will be announced when the meeting is scheduled, she added.

It’s still early to assess the full implications of the merger when it comes to benefit design and costs, New Hampshire Center for Public Policy Studies Director Steve Norton said. The changes are likely to be felt more significantly for those who are in the self-funded market because they lack protections in the Affordable Care Act that act as a buffer against large price increases.

New Hampshire, Norton pointed out, “has never been a particularly competitive market.” As noted by a 2012 study from the center, New Hampshire was home to an “overly concentrated (uncompetitive) private insurance market” between 2006 and 2009.

At the same time, though, Norton notes that New Hampshire’s provider market is even more concentrated than its insurance market. According to the same study from the center, “no hospital service area in New Hampshire would be considered ‘competitive’ according to standard economic definitions.”

“Based solely on the numbers, we’re in a concentrated market,” Norton said. “The insurance market got slightly more concentrated and may create more power in the marketplace relative to an already very concentrated provider environment.”

Colin Manning, a spokesman for Anthem Blue Cross and Blue Shield of New Hampshire, framed the merger as a move that will make the company more efficient and better able to control factors that affect affordability.

“The complementary capabilities of Anthem and Cigna will enable us to continue to lead the transition to value-based care that will reduce costs while improving health outcomes,” Manning wrote in an email.

An industry group representing insurance providers, America’s Health Insurance Plans, pushed back on the findings. In a statement, the group’s press secretary Clare Krusting dismissed the study on which the analysis was based as “fatally flawed” and argued that “provider consolidation – not concentration of health plan markets – is driving up health care costs for consumers and employers.”

(Casey McDermott can be reached at 369-3306 or cmcdermott@cmonitor.com or on Twitter @caseymcdermott.)


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