August 1, 2016
Anthem ready to dig heels in
Anthem, one of the largest insurance providers in the country, wants to buy rival Cigna. The U.S. Department of Justice moved to block the acquisition, saying it would reduce competition and raise prices on both open market and insurance exchanges. But, it looks like Anthem is not about to take the governmental rebuke sitting down. The company has vowed to stand and fight any attempts by the DOJ to block the purchase.
In many cases, when the DOJ signals its intention to block a transaction the companies involved back off. Not this time. Speaking to the Associated Press, Anthem CEO Joseph Swedish said his company would “run out the litigation as long as it takes.” Swedish said he expects the case to go to court in October.
Then Swedish doubled down, blaming a “volatile” insurance pricing market on the Affordable Care Act, essentially poking the federal government in the eye. Swedish added his company’s proposed deal would go a long way toward helping to stabilize the pricing, which would allow his brand to “continue its commitment to the public exchanges.”
Take a step back and marvel at that approach. It’s the carrot and the stick all in one gambit. First, he says the exchanges are playing havoc with market pricing. Then he says he’d be more than happy to stay in the exchanges IF his company gets its way.
There’s no doubt that losing Anthem (and potentially Cigna) from the health insurance exchanges would hurt the continued application of the Affordable Care Act, which has yet to hit its stride. Conversely, the move wouldn’t hurt Anthem overmuch. They insure fewer than one million people in the state-based exchanges, a small fraction of their overall book of business.
Two other insurers say the exchanges are hurting their business. Aetna is complaining about high costs and falling profits, and UnitedHealth has already pulled out of most markets due to losses.
Some market analysts are already saying the insurers will bend before the government does. For them, there’s more to consider than the financial burden of a protracted court case. They also have PR concerns. When the numbers come out, and insureds hear the company that made nearly $800 million in profit wants to cut their insurance because “it’s not enough” there could very well be serious repercussions on the consumer market.