Anthem Cigna Health Insurance Merger: What Acquisition Means For Consumers

When morning broke Friday, so did news that the health insurance provider landscape was about to get a little smaller, with the announcement that Anthem Inc. intended to buy rival Cigna for more than $54 billion, shrinking the figurative Mt. Rushmore of health insurance providers from five giants to just three. The move, which would create the largest U.S. health insurer, likely left some patients with health insurance plans from each company wondering one question: What comes next for me?

The answer, as to be expected, is somewhat complicated. However, there is one thing many professionals who deal with the topic of health insurance seem to agree on -- it's not necessarily good for consumers.

For starters, anybody covered under either of the health insurance providers in question should brace themselves for higher costs for health care supplies or services that are not covered under their insurance plans, said Dr. Leemore Dafny, a professor at the Kellogg School of Management at Northwestern University. "Research has not been too friendly to these mergers," Dafny, who has studied the topic of health insurance mergers, told the Hartford Courant. "If past is prologue and if you look at the averages, premiums go up."

That means more consumers could be paying increasing amounts for their health plans despite existing services not necessarily being enhanced or expanded. And with the sheer number of people covered under health insurance plans offered by each company -- Cigna has 14 million customers, representing more than 20 million covered people -- the stakes were high. The merger would place a total of 53 million people under the same health insurance umbrella, according to the New York Times.

Anthem's move to buy Cigna followed Aetna's acquisition of Humana earlier this month for $37 billion, which, before the latest merger, was the largest deal ever in the insurance industry. The trend of merging health care providers was being attributed at least in part to the existence of the Affordable Care Act, which forced doctors and hospitals to shave their lists of providers as a way to lower costs.

“One of the main goals of the Affordable Care Act was to restore competition in the health insurance sector,” David Balto, a former policy director at the Federal Trade Commission, told Forbes. “This consolidation will reverse these gains of the Affordable Care Act.”

Not all costs were expected to rise, though. "At the same time, though, consolidation among insurers could mean a stronger position in negotiating lower rates with hospitals," Erin Trish, a researcher at USC's Schaeffer Center for Health Policy and Economics, told the L.A. Times.

It was unclear what the residual effect would be for consumers as it related to bureaucracy, such as wait times other red tape patients must navigate through, as pricing seemingly took precedence.

There is, however, some cautious optimism surrounding the merger's effect on the cost of drugs for patients with dire health conditions, such as cancer or heart disease. “By and large, cancer treatment in the U.S. has not been subject to rigorous cost controls by health insurers or by Medicare,” wrote Moody's Investor Service, according to the Wall Street Journal. “Cancer drugs are typically reimbursed under a fee-for-service payment model, but we believe this will begin to slowly change.”

For their part, Anthem has downplayed any negative effects on consumers caught up in the budding merger, saying in part that the end result would be “meaningful value to consumers and shareholders through expanded provider collaboration, enhanced affordability and cost of care management capabilities,” according to a press release Friday.

But the American Academy of Family Physicians begged to differ, according to a letter it sent to Edith Ramirez, the chairwoman of the FTC, saying that "mergers in the health insurance industry would have an immediate and profound negative impact on the availability and affordability of health insurance for millions of consumers," CNN Money reported.

Dafny, the professor from Northwestern, said there was one way to know for sure exactly what consumers should expect coming from a mega-merger such as this one: Each company should demonstrate prior to the merger being completed all of the social benefits planned from the merger, and how those benefits would be calculated, Dafny wrote in in the New England Journal of Medicine.

"The absence of detail on these items should arouse concern about whether the goal of a given merger is truly to better serve the community."