Dear - CIDNY



Comments for the Record on the Application by Anthem, Inc. for Approval of Acquisition of Control of Cigna Life Insurance Company

Presented by: Heidi Siegfried, Esq.

To: The New York Department of Financial Services

On behalf of New Yorkers for Accessible Heaqlth Coverage (NYFAHC) I would like to thank the Department of Financial Services (the Department for holding a public hearing on the proposed merger between Anthem, Inc. (Anthem) and the Cigna Life Insurance Company of New York (Cigna)

New Yorkers for Accessible Health Coverage (NYFAHC) is a statewide coalition of 52 voluntary health organizations and allied groups who serve and represent people with chronic illnesses and disabilities including cancer, cystic fibrosis, diabetes, bleeding disorders, kidney disease, mental illness, lupus, and multiple sclerosis for whom access to affordable, accessible, comprehensive health coverage is essential to maintaining their well being. We represent people with serious illnesses and disabilities on the steering committee of Health Care for All New York (HCFANY), a statewide coalition of over 170 organizations dedicated to securing quality, affordable health coverage for all New Yorkers and join in their recommendations and testimony.

The Anthem-Cigna merger is likely to increase premiums and cost-sharing for New Yorkers while reducing access to health care. Previous mergers have produced just those results, despite regulators’ attempts to protect consumers through conditions like divestiture and despite insurers’ promises that consolidation would result in better service and cost savings that would be passed along to their customers. For this reason NYFAHC strongly urges the Department to reject the Anthem-Cigna application.

I. The acquisition will substantially lessen competition in the health insurance markets in New York State.

The Department has the authority to review and reject the Anthem-Cigna merger under N.Y. Insurance Law §1506, which grants this power in cases where a transaction will “substantially… lessen competition in any line of commerce in insurance in this state.” Anthem and Cigna reported a total of over $7.4 billion in New York health insurance premiums in 2014 which would place them second in market share by premium if combined. New York’s health insurance markets are [already] highly concentrated with the three largest insurance in the State controlling 60 percent of the individual market, 74 percent of the small group market, and 66 percent of the large group market.

II. The Proposed Transaction Threatens to Raise the Costs of Health Coverage to Consumers and Lower the Quality of Our Coverage

Impact on Health Care Access and Quality

At the hearing representatives of the two companies made conclusory and self-serving claims that consumers have broad choice and that this proposed merger will expand consumer access to health care through broader networks of hospitals, health care professionals and other medical services. NYFAHC is particularly concerned that consumers will experience a greater degree off overly restrictive provider networks or that the number of available providers will decrease. New York’s networks are already narrow. A recent study by the Leonard Davis Institute of Health Economics and the Robert Wood Johnson Foundation found that 39 percent of silver level plans offered on the New York Insurance Exchange use narrow networks that only include 25 percent or fewer of all area providers.

What is most important to NYFAHC members is that they be able to access the providers and specialists who know them and who have been treating them for many years as the market goes through its constant changes. Our members instead now find that they cannot find any products on or off the Exchange that include their doctors in the networks. When their doctors try to join networks, they are rebuffed. The lack of out-of-network coverage in our market means that our members select a Plan that has one of their providers and pay the rest out-of-pocket. One member has even pointed out that if he moved to Callifornia, where other family members live, he could access his New York providers through a product that he can buy there.

New patients also find that there are long delays before they can get an appointment with an in-network specialist. Appointment availability standards with a right to go out-of network if they cannot be met are needed in New York.

While there is little published academic research on the connection between consolidation and plan quality, the “most relevant study to date, which pertains to the Medicare Advantage Market, found that the availability of prescription drug benefits…. was higher in areas with more rivals…”.[1] We share the fear of other consumer advocates that health care quality will in fact almost certainly decline, as the combined company will have less of an incentive to maintain quality in a more concentrated health care market.

Impact on Consumer Costs

It is clear from the available studies, covering a number of markets, including public health insurance, large group and Medicare Advantage, that multiple insurers in a market will produce lower premiums.[2] As the HCFANY testimony at this hearing indicates, two economic studies have found that consumers experienced significant premium increases after health insurer mergers: a 7 percent premium increase as a result of the 1999 Aetna-Prudential merger, and a 13.7 percent premium increase in Nevada as a result of the 2008 United-Sierra merger. An additional study done in 2015, demonstrating the impact of consolidation on consumer rates, found that “dominant insurers increased rates an average of 75 percent higher than smaller insurers competing in the same market.”[3] It is important to note that “premium increase[s] [are] … not limited to the merging insurer; rival insurers raised premiums as well”, at least “where the merging firms had substantial overlap”. Even more discouragingly, while costs in the form of health care employment and wages were reduced following the Aetna-Prudential merger, the “savings were not passed on to consumers.[4] Consistent with basic economic theory, there is every reason to assume that Anthem will use its increased market power to raise prices to consumers. Professor Thomas Greaney, a leading health antitrust scholar, has argued that insurers have little incentive to pass any savings from mergers onto their policyholders.[5] Increases in costs can also take the form of increases in consumer deductibles and co-payments.

These studies are particularly important for New York regulators to pay attention to in evaluating this transaction, as New York consumers already the third highest costs of any state in the nation (as of 2013).[6] Health insurer premium rates are now increasing rapidly, despite the commendable efforts of DFS to protect policyholders through rate regulation in the individual and small group markets. For example, for 2017, the Department approved an average rate increase of 16.6 percent for the individual market and 8.3 percent in the small group market.[7] These increases, coming on top of more modest but still significant rate increases of 7.1 percent in the individual market and 9.8 percent in the small group market for 2016,[8] will undoubtedly make it harder for consumers and small businesses to afford health insurance and possibly could cause some to drop their coverage, undermining a central goal of the Affordable Care Act to expand coverage. Making the impact greater, this transaction would be completed in a period of declining real wages for many low income workers.

NYFAHC has held a Roundtable, featuring Chuck Bell, and held discussions with our members who havbe stated that they will submit additional comments. We hope that you will take their views into consideration.

Reactions on CIDNY’s Facebook page to the proposed merger have included the following:

Jennifer Szewczyk-Hapeman Being disabled is bad enough already.

Wanda Blake Corkey-wisher Sorry to hear that. Anthem is my insurer as a disabled retiree from Empire BCBS I have to say they have been good to me. A merger can only mean higher remiums.Not looking forward to it.

Laura Hanjoglu-Goerke merger could result in less access

Gregory Baxter Never a win for us

We believe that a strong case has beeen made for rejection by the Department of the Anthem-Cigna merger. The proposed merger will “substantially lessen competition” in the health insurance markets and is “reasonably necessary to protest the interests of the people of this state” given the negative impact that the merger would have on the cost and quality of health coverage provided to millions of New Yorkers.

However, we concur with HCFANY that should the Department instead opt to permit the merger, it should at a minimum condition the merger on strict conditions that ensure that the cost and quality of health coverage provided to New York consumers in particular is maintained and ideally strengthened.

Thank you for your consdideration of our comments.

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[1] Commonwealth Fund Study, at 5.

[2] The Commonwealth Fund: Evaluating the Impact of Health Insurance Industry Consolidation: Learning From Experience (Issue Brief, November 2015), at 5 (hereinafter, “Commonwealth Fund Study)”, .

[3] The studies mentioned herein are fully cited in the HCFANY Testimony,.

[4] See Commonwealth Fund Study, at 5.

[5] See Thomas Greaney, Examining Implications of Health Insurance Mergers, Health Affairs (July 15, 2015), .

[6] See Letter from Consumers Union, Health Care for All New York, New York Public Interest Research Group, 1199SEIU United Healthcare Workers East, Sergeants Benevolent Association, Consumer Action, Consumer Federation of America, and U.S. PIRG to Acting Superintendent Maria T. Vullo (March 4, 2016), at 3, (hereinafter, “Consumer Group Letter to Superintendent Vullo”).

[7] Department of Financial Services Press Release, Department of Financial Services Announces 2017 Health Insurance Rates (August 5, 2016) (hereinafter, “DFS 2017 Rate Release),” .

[8] Department of Financial Services Press Release, New York State Department of Financial Services Announces 2016 Health Insurance Premium Rates Including Rate for NY State of Health (July 21, 2015), .

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