That's what hospital and insurance companies say, anyway. But here's what the data say: Hospital and insurance mergers almost always lead to higher costs, lower efficiencies and less innovation. The reason is simple: Mergers reduce competition -- and it's competition that drives down prices and encourages more efficiency and innovation. Some healthcare mergers have been outright disasters for consumers; studies of mergers that took place in the 1990s and early 2000s showed price increases of as much as 40% in communities that lost competition. These findings are important because we are deep into a new era of healthcare consolidation.
That age-old question is no abstraction when it comes to your healthcare premiums, as Cigna and Anthem Blue Cross Blue Shield are pushing to merge into the largest health insurance company in America. With consumer groups, physicians and hospital officials insisting that the consolidation threatens to limit medical care and jack up insurance prices for millions of Americans, regulators in one small state, Connecticut, are positioned to play a pivotal role in determining whether the companies get the approval they need. The state is home to Cigna and has long been friendly to the industry, building up a reputation as the insurance capital of America. But some watchdog groups say that with a recent personnel move inside the state government, the friendship has become too close for comfort. When Anthem's plan to acquire Cigna was being negotiated in early 2015, Connecticut's Democratic Gov. Dannel Malloy appointed Katharine Wade as his state's insurance commissioner: She was a longtime Cigna lobbyist whose father-in-law works at a law firm that lobbies for the company, whose mother and brother previously worked at Cigna and whose husband still does. She was also a top official of the major lobbying group for the state's health insurance industry. As commissioner, she appointed a top deputy who worked at Cigna and she had a former longtime Cigna employee serve as an agency counsel in the merger review. As Wade continues to oversee Connecticut's review of Cigna's merger, she recently secured a position chairing a healthcare policy committee for insurance commissioners across the country.
Two major health insurance deals that would reshape the industry's landscape -- Anthem Inc.'s purchase of Cigna Corp. and Aetna Inc.'s deal to acquire Humana Inc. -- appear to be in trouble amid concerns they would reduce competition. The Justice Department, which has been reviewing both transactions, is preparing lawsuits to block them, Bloomberg News and the Wall Street Journal reported Tuesday. A decision whether to file the suits could come as early as this week, and the companies could fight in court or agree to settle, the reports said. A Justice Department spokesman declined to comment. Shares of the four companies fell 2% to 4% on Tuesday.
FILE - In this Nov. 17, 2009 file photo, a pedestrian walks past the headquarters of the health insurer Cigna Corp. in in Philadelphia. A federal judge on Wednesday, Feb. 8, 2017, rejected Anthem Inc.'s bid to buy rival health insurer Cigna Corp., saying the merger would likely lead to higher costs, less competition and diminished innovation. U.S. District Judge Amy Berman Jackson said the merger would significantly reduce competition in the already concentrated insurance market, particularly for large national employers.
Jackson says the merger would significantly reduce competition in the already concentrated insurance market, particularly for large employers. Just four insurers sell to companies with at least 5,000 employees spread across multiple states, and the judge says Cigna and Anthem aggressively compete for their business.