Last week, the Indiana Department of Insurance announced in a seven page decision that it had approved Anthem’s acquisition of Cigna. This decision comes a few weeks after the Department held an April 30th hearing examining the merger. The Indiana Department of Insurance may wish to reexamine that decision, because Anthem has just proposed the largest overall rate increase in the state for next year, an increase of 29%. This request is a clear sign of why competition in health insurance markets is so important, and what consumers can expect if the mergers are allowed to proceed.
Concentration in health insurance markets and health insurance premiums has been increasing rapidly over the past couple of decades. Workers’ contributions to premiums have increased 212% since 2000, while workers’ wages have gone up only 54%. Needless to say, this has made health care much more expensive and placed a substantial burden on ordinary families. As a result, 37% of consumers reported that they have skipped checkups or dental care due to costs, 35% have relied on home remedies or over-the-counter drugs instead of going to see a doctor, 34% have put off or postponed getting health care that they needed, and 27% have skipped recommended medical tests or treatments.
Multiple studies have concluded that increase concentration leads to higher premiums. As we mentioned in our comments, if Anthem’s acquisition of Cigna is allowed to go forward, Anthem will possess 59% of the administrative-services-only (ASO) market, up from 20% before the merger. Post-merger, Anthem would also possess 51.9% of the fully insured employer group market, and 15% of the Medicare Advantage market. Anthem’s merger with Cigna will eliminate the competition in all three of those markets, result in increased consolidation, and ultimately lead to higher premiums.
Indiana consumers are already facing rising health care costs. Anthem’s request for a 29% rate increase, the largest in the state, indicates what is to come. In its filing, the company claims that health care costs are increasing—both the price of services and how frequently they are used—and therefore its rate hike is justified. However, in the past dominant and powerful insurers have used their market share to greatly increase insurance premiums far beyond what is reasonable. A lack of competition and other insurance companies means that consumers have few available options in this situation, and therefore they will have to pay the higher premiums, even if they are already squeezed by rising costs.
The Indiana Department of Insurance has until August 23rd to review the rate filings before submitting them to the federal government. We hope they will reduce the rates, and that other State Insurance Commissioners will take note of Anthem’s actions. Anthem claims that the merger will benefit consumers and reduce costs, but as soon as the merger was approved in Indiana, it requested a 29% rate increase. The gap between the company’s claims and its actions is very broad, and should serve as a warning to antitrust regulators of allowing this deal to go forward.