U.S. hospital group warns of Blue Cross dominance if Anthem buys Cigna

(Reuters) - The American Hospital Association warned U.S. antitrust regulators that Anthem Inc's ANTM.N proposed acquisition of Cigna Corp CI.N will hurt other health insurers' ability to compete with Blue Cross Blue Shield plans, leading to higher premiums for consumers.

People enter the office building of health insurer Anthem in Los Angeles, California February 5, 2015. REUTERS/Gus Ruelas

Anthem, the country’s second-largest health insurer, runs Blue Cross Blue Shield plans in 14 states.

The hospital group, in a letter Monday to Assistant U.S. Attorney General William Baer, urged the Justice Department to challenge the Anthem-Cigna deal, saying Blue Cross Blue Shield plans are already much larger than competitors in many states.

Adding Cigna’s customers would give the plans greater power to demand larger discounts from providers and reduce competitors’ ability to compete, raising the cost of health insurance premiums paid by consumers, the group said.

“The acquisition threatens to both reinforce existing barriers to entry and raise new ones, further entrench dominant Blue plans, and exacerbate conditions conducive to abuse of market or monopoly power,” the group wrote in its letter.

Anthem spokeswoman Jill Becher said Anthem and Cigna have limited overlap in the markets where they operate.

“We will deliver for consumers by operating more efficiently to reduce our own costs, while enhancing our ability to manage the cost drivers that negatively impact affordability for consumers,” Becher said in a statement.

The Justice Department is now scrutinizing the proposed merger as well as Aetna Inc's AET.N plan to buy Humana Inc HUM.N to determine if the deals, which would reduce the number of nationwide health insurers to three from five, would lead to higher prices and fewer options for consumers.

Anthem would become the largest U.S. health insurer through its proposed $47 billion acquisition of Cigna, announced in July.

The American Hospital Association, American Medical Association and American Academy of Family Physicians have already appealed to regulators to look at the possible impact of the mergers on competition.

Reporting by Susan Kelly in Chicago; Additional reporting by Caroline Humer in New York; Editing by Lisa Shumaker