Latest news in Anthem’s appeal: Organizations file amicus curiae briefs

Monday, March 20, 2017 12:21 PM

The American Medical Association, American Hospital Association, and professors with expertise in the subject of health economics, antitrust and/or competition policy filed amicus curiae briefs in response to Anthem’s appeal to the February U.S. District Court ruling that blocked its merger with Cigna. Amicus curiae briefs are filed with the court by someone who is not a party to the case, to offer information that bears on the case.

Anthem and several individual economists and business school professors without known expertise in health care filed briefs in support of reversing the district court’s order. Anthem focuses on its efficiencies defense; that is, claimed medical cost savings that “enhance consumer welfare,” the purpose of the antitrust laws. They do not dispute that the merger would be anticompetitive in a national accounts market, but for the claimed savings that would come, Anthem says, from applying Anthem’s lower reimbursement rates to Cigna-contracted physician and hospital contracts. Employers and employees would be the beneficiaries, given the automatic pass-through of health care costs under the ubiquitous “ASO contracting” in the national accounts market.

In a few pages, the professors’ brief says the district court erred by considering only the consumer harm of potential price increases while disregarding the consumer benefit of potential price reductions.

Here are a few topline take-aways from the briefs in support of blocking the mergers.

American Medical Association

• The AMA argues the difference between Anthem’s generally lower physician reimbursement fees and Cigna’s generally higher fees does not represent a consumer benefit achievable in the merger, much less one that outweighs the distortions to the health insurance market that the merger will cause.
• Cigna’s higher rates compensate providers for their investment of time and money that Cigna’s collaborative care model requires.
• Cigna remains competitive because many employer customers have rejected Anthem’s lower provider payment rates in favor of their employees staying healthier and requiring less health care, thus reducing employer overall health care costs.
• Anthem’s claim that the merger will enable them to offer a new product – Cigna’s products at Anthem’s prices – was contradicted by the evidence at trial and the experience of the market.
• The court properly found that Anthem’s reimbursement cuts, rather than enhancing consumer welfare, could cause quality to degrade and consumers to be deprived of choice. Moreover, Anthem has never explained how or why health care providers, having lost significant revenue, would continue to invest in the programs they and Cigna use to keep patients healthy.
• In short, finding innovative ways to improve patients’ health and reduce costs requires collaboration and investments that Cigna had been more willing to undertake than Anthem.
• Accepting Anthem’s claims would turn the efficiencies defense on its head, rewarding Anthem for playing catch-up through an acquisition instead of developing its own products as a result of competition.
• The evidence at trial echoes what state medical associations learned when they canvassed their members about the likely effects of an Anthem-Cigna merger.

Professors with expertise in the subjects of health economics, antitrust and/or competition policy

• Not to be outdone by Anthem, professors Leemore Dafny, Ted Frech and Marty Gaynor produced an amicus brief in collaboration with the numerous scholars listed in in the brief’s appendix (27 signed in total).
• They argue that consolidation in health insurance markets does not, on average, benefit consumers.
• Although greater insurance market concentration tends to lower provider prices, there is no evidence the cost savings are passed to consumers in the form of lower premiums.
• On the contrary, premiums tend to rise with increased insurer concentration. In addition, amici agree with the Anthem trial court’s skepticism that the largest source of alleged merger – induced cost savings, a reduction in rates paid to providers – will be beneficial to consumers, let alone sufficient to offset the harm arising from reduced competition in insurance markets.

American Hospital Association

• AHA asserts that the merger will reduce innovation at a time when innovation is most needed.
• Innovative payment models are critical to sustainable health care.
• The antitrust laws are intended to promote innovation, including by preventing acquisitions that would harm innovation.