California's top insurance regulator has urged the U.S. Justice Department to kill the pending $53 billion transaction between health insurance titans Anthem and Cigna Corp. over concerns of higher prices and lower quality plans.
California Insurance Commissioner Dave Jones, a regulator known not to mince words, said Anthem has made “vague, speculative and impossible-to-verify assertions” related to the benefits of the deal.
“Anthem and Cigna failed to provide details to support their claim of $2 billion in savings, and they refused to guarantee consumers and businesses will see the benefit of any potential savings in reduced prices,” Jones said in a statement. “More competition in California's consolidated health insurance markets is needed, not less.”
In a 22-page letter (PDF) to top Justice Department leaders, Jones said the “most extreme” example of where Anthem's deal would lessen competition is the self-insured employer market. Anthem and Cigna control a combined 61% of that market. Many large, self-insured companies have expressed similar concerns over Anthem's acquisition.
Jones is the first state regulator to take such an aggressive stance toward the pending healthcare mergers. Missouri has labeled Aetna's acquisition of Humana as anti-competitive, but officials there said divesting some health plans could possibly fix some of their concerns.
Investment bank Leerink Partners took a bearish view of California's opposition, saying Thursday the decision is “material to the broader antitrust scrutiny” even though Jones doesn't have the authority to overturn the merger.
During public meetings, Jones repeatedly peppered Anthem officials with questions about whether the supposed cost savings resulting from the merger would be passed on to consumers in the form of lower insurance premiums. Anthem executives could not guarantee there would be lower prices, arguing that assumptions surrounding “underlying medical costs” make up most of the premium totals and are out of their control.
Last September, members of the Senate grilled Anthem CEO Joseph Swedish and Aetna CEO Mark Bertolini about that same issue. Both executives hedged on their answers. Bertolini ultimately said savings would be passed on through the company's products. Swedish gave a more nebulous answer, saying: “We are committed to driving affordability for all of our customers.”
Anthem said in a statement that it disagreed with Jones' analysis and that California's Department of Managed Health Care holds oversight of the transaction.
“We do not believe that the California Department of Insurance's opinion is based on the true merits of this transaction,” Anthem's statement read.
California held up the recent deal between Centene Corp. and Health Net, two large Medicaid insurers, but Jones never advocated for the federal government to kill that deal.
CORRECTION: This story has been updated to reflect the individual stance Jones has taken on the merger.