Anthem, Justice Department clash over impact of Cigna buy
Anthem Inc. and the U.S. Justice Department extended their clash over whether the insurer’s planned takeover of rival Cigna Corp. will raise costs, as government witnesses testified Friday that the deal will harm health-care providers and patients.
Frank Gorse, a vice president at Patient First, which operates urgent-care centers in the Mid-Atlantic region, said he’s concerned the merger will squeeze providers due to Anthem’s lower payouts, harming patient services. Anthem’s rate increases have fallen far short of Patient First’s inflationary cost increases, and the merger could push Cigna’s rates down to Anthem’s level, he testified.
"We’re going to have to cut services, and that’s going to be bad for patients," Gorse said, in federal court in Washington.
The loss of competition that would result if Anthem takes over Cigna is the centerpiece of the government’s lawsuit seeking to block the $48 billion merger. By acquiring its rival, Anthem will be able to raise costs for employers who have one less choice, the government says. It will also gain leverage over doctors and hospitals and lower reimbursement rates paid to them, according to the Justice Department. The trial is focused on local markets after testimony ended on the national impact of the deal.
The case is one of two antitrust trials in Washington where the Justice Department is suing to stop a health-insurer merger. The other deal is Aetna Inc.’s planned takeover of Humana Inc. The suits are aimed at preventing concentration among the biggest U.S. health insurers and protecting competition in an industry that President Barack Obama reshaped with the 2010 Patient Protection and Affordable Care Act.
In the Anthem case, the government tried to show in testimony Thursday that employers that contract with Anthem and Cigna have benefited as the two battle for business. Anthem countered with witness testimony that local insurance markets are highly competitive and that the insurer is losing business to several rivals, not just Cigna.
Anthem contends its tie-up with Cigna will aid customers by achieving efficiencies neither could attain alone and by passing along reduced medical costs to consumers. C. Burke King, the president of Anthem’s Virginia business, testified Thursday that the deal would combine the best of both companies and make Cigna a stronger competitor.
"That is our intention -- to compete hard," King said. "If we increased rates given the competitive environment that would mean we would lose more accounts."
Henry Lipman, the senior vice president for financial strategies at LRGHealthcare, a New Hampshire hospital operator, testified Friday on behalf of the Justice Department that under its latest contract with Anthem, LRG saw its payments reduced. It is cutting staff to reduce costs, and Lipman predicted the merger would further reduce LRG’s revenues.
Bo Hawthorne, a benefits consultant at Scott Insurance in Richmond, Virginia, testified on Thursday that most of his clients use Anthem and Cigna. Some have been able to lower their costs by playing one off the other in contract negotiations and by switching between the two, he said. Those savings ultimately mean lower costs for employees.
"Any savings to my clients ultimately is going to matter," he said.
The case is U.S. v. Anthem Inc., 16-cv-1493, U.S. District Court, District of Columbia (Washington).