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California Insurance Commissioner Urges Feds To Block $54 Billion Anthem-Cigna Deal

California Insurance Commissioner Dave Jones urged federal officials Thursday to block the merger of health insurance giants Anthem Inc. and Cigna Corp., declaring the $54-billion deal anti-competitive and harmful to consumers.

The state insurance department doesn't have the authority to thwart the merger on its own, but Jones' recommendation could carry considerable weight in Washington and hinder the companies' efforts to win federal antitrust approval.

Jones said the Anthem-Cigna merger would likely result in higher costs for consumers and businesses, fewer choices for coverage and a lower quality of medical care. He said the California health insurance market was already highly concentrated among four large companies, and this deal would only make matters worse.

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“Bigger is not better for California consumers,” Jones said at a press conference in Sacramento. “I find that the Anthem and Cigna merger will harm California consumers, California's businesses and the California health insurance market.”

Anthem criticized Jones' decision and expressed confidence it would obtain the necessary government approval for the merger.

“We do not believe that the California Department of Insurance's opinion is based on the true merits of this transaction,” Anthem said in a statement Thursday. “We are confident that the highly complementary nature and limited overlap of our organizations that will benefit the complex and competitive health insurance markets will be reviewed on the facts by the Department of Justice and appropriate state authorities.”

The U.S. Department of Justice is investigating the merger, and federal officials could seek divestitures to reduce market power or try to block it entirely on antitrust grounds.

The deal also remains under review by a number of state agencies. California's other insurance regulator, the Department of Managed Health Care, is still examining it as are other states, such as Connecticut, which plays a critical role since Cigna is based there.

The decision in California was being watched closely across the country by consumer groups, medical providers and Wall Street investors. Jones said he was the first state insurance regulator to formally oppose the Anthem deal.

In addition to Anthem's proposed acquisition, another merger proposal between Aetna Inc. and Humana Inc. would consolidate the U.S. health insurance market from five major players down to three. Jones hasn't issued a decision yet on the Aetna-Humana tie-up.

The insurers contend that their mergers will enable them to eliminate unnecessary costs and deliver more affordable benefits to employers and consumers.

But Jones soundly rejected that argument from Anthem, saying its claims of $2 billion in savings were “vague” and “not credible.”

“There is simply no guarantee that these savings would benefit policyholders,” Jones said.

Jones also expressed concern about Anthem and Cigna gaining a significant share of the market for administering benefits of self-insured employers. He said the combined companies would have 61 percent of that employer market in California.

“This suggests Anthem would gain a monopoly share of the market,” Jones said.

Some big employers nationwide have raised similar worries about having fewer competitors to choose from.

Jones also cited Anthem's prior history of big rate hikes and said increased market power could trigger even more.

If the Anthem-Cigna deal is completed, the combined company would have 54 million members, making it the largest U.S. health insurer. It would generate $117 billion in annual revenue. Anthem would also become California's largest health insurer, topping HMO giant Kaiser Permanente.

The Anthem-Cigna merger has been rocky from the start. The two sides bickered publicly during negotiations last summer before finally reaching a deal.

Industry analysts have been growing more pessimistic about the chances the Anthem-Cigna deal will actually be consummated.

Ana Gupte, a health care analyst at Leerink Partners, said even without direct jurisdiction over the deal, the California insurance department's opposition spells further trouble for it.

“California is an important state for this merger, and we expect it to be material to the broader antitrust scrutiny,” Gupte said.

This story will be updated.

This story was produced by Kaiser Health News, which publishes California Healthline, a service of the California Health Care Foundation.

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Study Suggests Federal Standard May Be Thwarting Some Transplant Patients

For the roughly 15,000 people who need a liver transplant, it's a waiting game. With demand for donated livers far outstripping supply, patients may spend months or years on a transplant waitlist, their position in the line gradually improving as they get sicker. A recent study suggests that this system may be changing but not necessarily for the better.

In an effort to get or keep a good performance rating from the federal government, transplant centers have been labeling some patients “too sick to transplant” and dropping from the waitlist some who may been viable candidates, the researchers found. In addition, despite removing more sick patients from the waiting list, one-year survival rates for patients who received transplants didn't improve.

The study, published online in the Journal of the American College of Surgeons in April, examined trends in “delisting” at 102 liver transplant centers, including 90,765 waitlisted adults who died, between 2002 and 2012.

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Midway through the time period under study, the federal Centers for Medicare & Medicaid Services implemented a new “Conditions of Participation” policy that established performance standards for heart, heart-lung, intestine, kidney, liver, lung and pancreas transplant centers that participate in the Medicare program.

In order to meet CMS standards, liver transplant centers have to meet expected patient and liver graft one-year survival rates. Those that don't meet the performance standards, which CMS recently eased somewhat, may be flagged for poor performance and have to implement program improvements or risk their participation in the Medicare program. (In its letter describing the new guidelines, CMS noted that one-year patient survival for liver transplants increased from 87.7 percent to 90.8 percent between 2007 and 2014.)

But something happened when the new policy took effect in 2007: The percentage of patients that liver transplant centers considered too ill or unsuitable for a transplant rose by 16 percent, and the likelihood of delisting continued to increase each quarter through the end of the study period. Compared with the time period before, the patients who were taken off the waitlist after the CMS policy change were more likely to be age 55 or older and have more severe liver illness.

The study authors speculate that the new standards made transplant centers more averse to risk and encouraged them to drop sicker patients who might affect their patient survival rates.

“There's no common definition for when someone is too sick to transplant,” said Natasha Dolgin, an M.D./Ph.D. candidate at the University of Massachusetts Medical School and the study's lead author.

Some suggest a different way to look at the impact of the CMS policy. “Maybe centers are making the internal decision of trying to choose the best candidates,” said Dr. David Goldberg, medical director for living donor liver transplantation at the University of Pennsylvania.

The most common reason for a liver transplant is cirrhosis, or scarring of the liver, often caused by hepatitis C or alcoholic liver disease.

The severity of patients' illness is evaluated based on their Model for End-Stage Liver Disease (MELD) score, a numerical score between 6 and 40 that predicts the risk of death within three months and is calculated based on three laboratory values.

Nationwide, 6,729 liver transplants were performed in 2014, but 1,821 patients died on the waitlist. Another 1,300 people were removed from the waitlist because they were considered too sick for a transplant. Patients' health may deteriorate to the point that a transplant is no longer advisable, or they may contract an infection, for example, that makes delisting necessary. But those reasons don't explain the increase in delisting following the introduction of the CMS policy, according to the study.

Still, Dolgin said she doesn't blame transplant centers for their waitlist decisions. Once there is a “benchmark, you try to meet that.”

Kurt Schnier, an economist at the University of California, Merced who has conducted research examining the impact of the CMS policy on kidney transplant waitlisting practices, said the policy has increased the length of time patients are on the waitlist. That research is under review for publication. The CMS policy may also affect surgeon behavior at centers that don't meet the condition of participation standards, leading them to conduct fewer transplants, for example.

“It's a well-intended policy,” Schnier said. “The problem is that it creates perverse incentives at the physician level that may undermine the personal welfare of the general population.”

“This is part of the culture now,” said Dr. Hillel Tobias, medical director of New York University's liver transplant service and chairman of the medical advisory committee of the American Liver Foundation. “You can't take a chance because if your numbers go down you're going to get canned.”

One of the goals of the CMS policy was to improve transplant outcomes because of concerns related to transplant center quality and service. Yet the study found its introduction didn't have a statistically significant impact on mortality rates within a year of transplantation.

Liver transplants are complicated, and the fact that survival didn't improve during the course of the study might reflect the fact that there may be complications that are not preventable, said Goldberg.

Asked to comment on the study, a CMS official said, “CMS is reviewing available evidence about the impacts of our policies on organ transplant centers. After thorough review we will determine a course of action.”

Please contact Kaiser Health News to send comments or ideas for future topics for the Insuring Your Health column.

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