Under $48B Anthem-Cigna deal, healthcare costs could rise for employers

As insurance giants Anthem and Cigna await U.S. antitrust approval, an analysis from Aon Hewitt suggests the $48 billion acquisition could result in higher costs for large companies offering employer-sponsored medical benefits, according to Reuters.

With more than 154 million people receiving healthcare coverage from their employers, the large employer market is a primary concern for the U.S. Department of Justice regulators reviewing the transaction. If the department finds the acquisition would significantly drive up the cost of coverage, it could block the deal, according to the report.

Anthem purports employers would benefit from the deal, not suffer. It argues a bigger Anthem could negotiate more favorable deals from physicians and hospitals, from which customers would save. Additionally, the insurer said there would still be plenty of competition with local insurers following the acquisition.

However, according to an Aon Hewitt analysis of benefits data for Reuters, the majority of large employers purchase employee health benefits from just one or two insurers. Of 75 companies representing a cross-section of industries, more than half (54 percent) used a single insurer and 26 percent used two.

While Aon Hewitt spokeswoman Maurissa Kanter said the analysis did not conclude "whether or not carrier consolidation would be a competitive issue that could lead to higher prices for employers," she noted that the data didn't "support an argument for or against market consolidation."

According to Peter Carstensen, an antitrust expert and professor emeritus at the University of Wisconsin (Madison) Law School, it is less efficient for organizations to use multiple regional insurers than hiring one or two large insurance providers.

"The Aon Hewitt data on its face is bad for the deal and hurts their chances of getting approval," Mr. Carstensen said, according to Reuters.

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