Washington – Connecticut was among the states and cities that would be hurt by the merger of Anthem and Cigna, a government witness in an antitrust trial said Tuesday.
David Dranove, a Northwestern University health care economics professor, said the merger would result in higher prices and poorer care in many metropolitan areas and in certain states, including Connecticut, that already have few choices of health insurers.
He challenged Anthem’s argument that smaller, regional insurers, like Harvard Pilgrim, would provide enough competition to hold down prices and spur innovation.
“If you have a highly concentrated market and you have a merger, you go from bad to worse,” Dranove said.
Anthem is the largest health insurer in Connecticut, followed by Aetna and Cigna, which Dranove said is losing market share in the state to Anthem.
Nationally, Anthem covers 40 million Americans, and Cigna covers 13 million. The merger would produce the nation’s largest health insurer, eclipsing the current reach of United Healthcare.
While this, the second phase of the trial in the Justice Department’s case against the $54 billion Anthem-Cigna merger, is aimed at scrutinizing the tie-up’s effect on certain geographical areas, Dranove also testified that a merged company would hurt the financial health of hospitals and doctors.
He said the additional market power would make it harder for solo practitioners and small groups of doctors to reject an insurer’s “take it or leave it” approach to paying them for their services.
Larger groups of doctors and hospitals would lose some of the leverage they have now if there are fewer insurers, Dranove said.
If a provider rejected an insurer, it would be difficult to make up for the loss of patients that insurer would bring by serving more Medicare or Medicaid patients, because the government-run insurance programs have low reimbursement rates.
“Using data from Connecticut, you would have to bring in three new Medicare or Medicaid patients to offset the patient that you lost,” Dranove said.
Fearing a reduction in the amount of money insurers will pay for medical services, the nations’s largest doctor, hospital and nurse organizations oppose the merger, including the American Medical Association and the American Hospital Association.
Anthem and Cigna argue the synergies that would result in the merger would result in lower premiums for Cigna customers and more innovation for Anthem customers.
The Anthem-Cigna antitrust trial began a month ago. Another trial on the Justice Department’s effort to block a proposed $37 billion merger between Aetna and Humana is in its third week in the same federal courthouse.
In both trials, a slew of economists, some testifying on behalf of the insurers and others on behalf of the Justice Department, are trying to persuade U.S. District Judge Amy Berman Jackson, who is hearing the Anthem-Cigna trial, and U.S. District Judge John Bates, who is hearing the Aetna-Humana trial, with their arguments.
The Justice Department filed suits against both mergers in July, attempting to avoid contraction of the health insurance industry to just a handful of major players. The state of Connecticut has joined the Justice Department in the suit against the Anthem-Cigna merger.
On Tuesday, Aetna witness Jonathan Orszag, an economist and principal of the Chicago-based consulting firm Compass Lexecon, defended his testimony that an Aetna-Humana merger would be complementary because Humana focuses on Medicare Advantage and Aetna on commercial group insurance policies.
Orszag also has argued the merger would not reduce choices for seniors because original fee-for-service Medicare is an option and both programs are regulated by the Center for Medicare and Medicaid Services and would not allow the merged company to dominate the market.
“The government is setting the terms for competition,” Orszag said on Tuesday.
Government lawyers tried to undermine Orzsag, who served as a National Economic Council adviser in the Clinton administration.
They pointed out that a New York federal judge rejected much of the analysis Orszag did for Apple Inc. in litigation related to that company’s conspiracy to raise the price of e-books.
There will be closing statements in the Aetna-Humana case Wednesday. The Anthem-Cigna trial is expected to wrap up Friday.