What Anthem-Cigna merger rejection means for your practice

March 6, 2017

Earlier this month, federal judge Amy Berman Jackson of the U.S. District Court for the District of Columbia ruled against the proposed $54 billion merger between Anthem and Cigna, the second- and third-largest commercial health insurers in the country.

Last month, federal judge Amy Berman Jackson of the U.S. District Court for the District of Columbia ruled against the proposed $54 billion merger between Anthem and Cigna, the second- and third-largest commercial health insurers in the country.

 

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The merger would have created the largest health insurance company in the United States. The U.S. Department of Justice brought the case against the merger, arguing that it would violate antitrust laws by creating a company so large that it would squelch competition from smaller companies in the health insurance market.

Anthem had claimed that the cost savings achieved by the merger would actually reduce premium prices for consumers, because it would allow the merged company to cut its own operating costs. This, Anthem said, would result in a new ability to offer lower-priced options to customers..

Judge Jackson rejected this argument, however, noting that Cigna itself found Anthem’s cost savings claim lacking in credibility.

“Cigna officials provided compelling testimony undermining the projections of future savings, and the disagreement runs so deep that Cigna cross-examined the defendants’ own expert,” Jackson wrote in her ruling. “The Court cannot properly ignore the remarkable circumstances that have unfolded both before and during the trial.”

The judge’s order said that the merger had the potential to drive up costs to consumers, and to reduce choice for patients by creating a more restricted list of in-network healthcare providers.

This would have dire consequences for primary care physicians who chose to accept other insurance offered by the national and state healthcare exchanges.

 

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The Physicians Advocacy Institute (PAI) applauded the judge’s decision. The institute advocates for fair and transparent payment policies to doctors from insurance companies and others.

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"Big health insurers are zero for two when it comes to mergers, with federal courts delivering a resounding message that supports a competitive healthcare marketplace,” said Robert W. Seligson, PAI president, in a prepared statement. “This merger would have resulted in higher prices and diminished innovation, which is bad news for patients already coping with narrow provider networks and increased out-of-pocket costs. Competition helps keep premiums in check and allows more choice in which physicians patients choose to see for their medical care. This decision is a clear win for patients."  

 

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With the merger off the table, competition for customers will continue between the two corporations. This means that primary care physicians will retain the opportunity to negotiate on behalf of their patients, notes Randal Schultz, JD, a partner in the law firm of Lathrop & Gage LLP in Kansas City, Missouri, and chair of the firm's Healthcare Strategic Business Planning Practice group.

“By eliminating that potential market power, you have more room to have primary care doctors have some kind of voice in the marketplace,” Schultz says. The blocked merger signals that it’s time for doctors to think seriously about new delivery models that will reduce costs in the system as a whole, he noted.

“We want to keep that corridor open for physicians, between historical costs and current costs,” he says.

The health insurance system today drives cost to the employer, who provides a choice of insurance providers to its workers, Schultz says. When a primary care doctor finds ways to reduce the patient’s healthcare costs-by treating a patient outside of the hospital, reducing the length of hospital stays, or foregoing  unnecessary tests, for example-the patient and the employer both save money.

“That money should go right to the primary care doctor,” says Schultz.

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“The employer is thrilled because the cost doesn’t go up, and the primary care doctor is incentivized to keep the cost down,” he continued. “If the doctors really understand the nature of the business, there are a lot of ways to deliver healthcare services that create a better financial model for the doctors.”

Preventing the Anthem/Cigna merger makes it possible for primary care doctors to think more creatively about working with insurance companies, says Schultz.

“Because no merger occurs, it creates the opportunity for more insurance companies in each market,” he explains. “If I’m a primary care doctor, I want to find every way I can to be involved in the care of the patient, to get between the employer and the patient. The primary care doctors are in the driver’s seat.”

 

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With so many consumers paying high out-of-pocket costs because of rising  deductibles, he continues, the health insurance companies that win will do so by reducing overall costs while increasing access to care. For example, it costs less to send a patient home with a private duty nurse than to keep that patient in the hospital several days longer to recuperate after surgery.

“If I were your doctor and I told you that your mother could go home a day early from the hospital and have a nurse go with her, wouldn’t that be better?” Schultz says. “She’s scared sitting in the hospital, and she’s in danger of infection. And it’s cheaper to have a nurse go home with her. That would save on cost and be better for the patient. Isn’t that what we want? It’s intuitive, it’s practical and it helps everybody.”

Anthem announced on February 9 that it would appeal the U.S. District Court’s decision, requesting an expedited hearing. A date for the hearing has not yet been set.