What Does Anthem-Cigna Failure Say About Health Insurance Mergers?

May 15, 2017

Friday marked the official end to Indianapolis-based Anthem’s bid to merge with Cigna, and the second time in recent months a major health insurance merger has failed.

It underscores the uphill regulatory battle that big health insurers face in trying to join forces.

Anti-trust officials blocked mergers between Humana and Aetna, and Anthem and Cigna this year. Those four have something in common: they’re among their industry’s biggest, top-earning companies.

Tim Greaney, an antitrust expert at the University of California-Hastings College of the Law, says courts will always be skeptical of mergers that big.

Companies involved have to work harder to prove the merger is necessary to save money – and that they won’t use their new market power to raise prices.

Greaney says many in the competition-driven American health insurance market, many companies are already too big to make that case.

“If you have too few hospitals or too few insurance companies, the basic economics suggests that prices will go up and quality will at best remain the same and may even get worse,” he says.

But Greaney notes hospitals still have one advantage over insurance companies in seeking to merge.

He says it’s easier for hospitals to argue they can provide better service by merging than it is for insurers, which need to maintain and fund local networks with care providers, no matter how big their umbrella company becomes.