Managed Care Plan Mergers - Aetna Acquisition of Humana and Anthem Acquisition of Cigna

Executive Summary of TMA’s Letter in Opposition

February 11, 2016

On February 11, 2016, the Tennessee Medical Association (TMA) submitted a formal objection letter containing more than 120 pages of data and information to the U.S. Department of Justice’s Antitrust Division and Tennessee Attorney General. The letter strongly urges the agencies to reject the proposed mergers between Aetna and Humana and Anthem and Cigna.

The prospect of reducing five national health insurance carriers to just three would lead to an unprecedented lack of competition beyond that which already exists in most health insurance markets and that reduction in competition would be detrimental to physicians and healthcare in Tennessee.

On September 8, 2015, the American Medical Association (AMA) released the 2015 edition of Competition in Health Insurance: A Comprehensive Study of U.S. Markets, which offers the largest and most complete picture of competition in health insurance markets for 388 metropolitan statistical areas (MSAs), as well as all 50 states and the District of Columbia. It shows that 70 percent of major Tennessee markets are already considered highly concentrated.

Impacts of the Proposed Mergers on Tennessee Markets: Anthem - Cigna

Data in the AMA report showed that the Anthem(Blues)-Cigna merger would raise the HHI score. The higher the score, the less competition there is. This raises significant competitive concerns particularly in the Kingsport-Bristol and Chattanooga commercial markets, warranting regulatory scrutiny.

Cigna holds the second highest combined product market share in seven of the top 10 Tennessee markets. For Tennessee as a whole, BCBS-TN and Cigna have 73 percent of the combined market already.

The “two-thirds rule” is a non-competition agreement among the members of the BlueCross BlueShield Association, of which Anthem is a member in 14 states. BCBS-TN is also a member of the Blues Association. The BlueCross “two-thirds rule” could preclude Anthem from expanding its non-Blues business, including Cigna, because of the arrangement with BCBS-TN, or require Anthem to pull Cigna business out of certain markets. Cigna would ostensibly no longer compete for new business unless it decreases its business as a competitor in markets outside of Anthem’s service area.

TMA’s letter also casts doubt about Cigna’s ability to operate efficiently in a commercial plan merger based on its experience with the HealthSpring acquisition in 2012. In January 2016, Cigna was cited by CMS with numerous deficiencies in its expanded Medicare Parts C and D business.

Impacts of the Proposed Mergers on Tennessee Markets: Humana - Aetna

Tennessee’s overall HMO HHI, already in the highly concentrated category, would be raised a staggering 1291 points by the merger.

If the merger is approved, Humana will have 89 percent of the Clarksville HMO market. For the combined HMO, PPO, and POS commercial markets, the merger would raise the HHI 294 points in the Clarksville MSA, a moderately concentrated market. For the HMO market, the merger would raise the Clarksville HHI 2503 points. The HHI would be raised 171 in an already highly concentrated Clarksville PPO product market. In the Johnson City MSA, the effects of the merger will be even more pronounced.

It already has a highly concentrated HHI of 3549, but the Humana – Aetna merger would raise it 106 points, raising a red flag for significant competitive concerns.             
Implications of the Proposed Mergers on Patients.

For patients, there would be fewer plans from which to choose their health insurance, contrary to the intent of the Affordable Care Act. The demise of the Tennessee Exchange CO-OP at the end of 2015 illustrates the difficulty of competing in the Tennessee market.  


Insurers already are creating very narrow and restricted networks that force patients to go out of network to access care. In some cases, very restricted networks also may impact patient access and quality by not readily providing a medically appropriate out-of-network benefit to patients, or by refusing to count copays to out-of-network physicians toward patient deductibles.


Impacts of the Proposed Mergers on Physicians
TMA’s letter chronicles the history of “the MDL Litigation” it filed against BCBS-TN, Cigna, Aetna, and UnitedHealthcare in 2002 and the abuses that led to the suits. The cases were settled at various times, and the plans agreed to refrain from certain behavior during the settlement period.  However, many of these and other abuses have re-surfaced due to the unequal bargaining power physicians have vis-à-vis Big Insurance. Mergers would give plans monopsony power and only increase administrative hassles and lower reimbursement rates for physicians.

TMA stands vehemently opposed to these mergers.