Economist testifies Anthem-Cigna deal a risk to competition

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Anthem Inc.’s proposed $48 billion merger with Cigna Corp. could give the insurer the power to raise prices for employers both in the 14 states where it does business, as well as across the country, according to a witness in the U.S. government’s lawsuit to block the deal.

“The merger will harm competition in the market for national accounts” as well as in states where Anthem operates, said David Dranove, a health-care economics professor at Northwestern University’s Kellogg School of Management in Evanston, Illinois.

Dranove told U.S. District Judge Amy Berman Jackson that the combined company could impose a price increase in the range of 5 percent to 10 percent without losing business simply because there would be one less option available.

The Justice Department sued in July to block the deal, as well as the union of Aetna Inc. and Humana Inc., saying they would reduce the number of large, national health care insurance providers, leading to increased costs for their clients. The Anthem-Cigna trial started Nov. 21. The Aetna-Humana case goes to trial Dec. 5 before a different federal judge in Washington.

Indianapolis-based Anthem has argued it’s not a true national insurer because it operates in only 14 states. The government has countered that it has the ability to serve customers across the nation by being a member of the Blue Cross Blue Shield Association.

The government called a Humana executive to underscore the point that Anthem is a national insurer. Elizabeth Bierbower, Humana’s president of group sales, testified that it couldn’t compete with national players Anthem, Cigna, Aetna or UnitedHealth Group Inc.

“Our geographical footprint isn’t a national one,” she said. “We’re a regional player.”

That statement was challenged by Anthem attorney Martin Toto, who established Humana had won a $40 billion, 31-state military insurance contract.

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