CI Cigna Group

The chief executives of Aetna Inc. and Anthem Inc. defended their planned deals before a Senate subcommittee, facing sharply critical testimony that raised questions about the impact of health-insurance consolidation.

Aetna is seeking to acquire Humana Inc., in a $34 billion transaction focused largely on the private Medicare plans known as Medicare Advantage. Anthem is aiming to take over Cigna Corp. in a $48 billion deal. The two mergers together would have the effect of shrinking the top five health insurers to a big three, each with annual revenue of more than $100 billion. The third player would be UnitedHealth Group Inc.

In their own testimony before the Senate Judiciary antitrust subcommittee, Mark T. Bertolini of Aetna and Joseph R. Swedish of Anthem emphasized that health care is delivered largely on a local basis, and they argued markets would remain competitive if their deals closed. Both also said their deals would benefit consumers and encourage new forms of payment to health-care providers.

Mr. Bertolini said only 8% of Medicare beneficiaries would get coverage from the combined Aetna-Humana and "robust competition will remain in the Medicare market." Mr. Swedish said Anthem and Cigna had "very limited and in most cases no market overlap."

But other witnesses were skeptical about the benefits of the deals. Leemore Dafny, a professor at Northwestern University's Kellogg School of Management, said consumers are "paying a premium on our premium" because of lack of competition among insurers. Richard J. Pollack, the chief executive of the American Hospital Association, said the group was concerned the insurance deals would lead to fewer choices and higher costs for consumers.

Sen. Al Franken of Minnesota, a Democrat, grilled the two insurance CEOs on whether they would commit to passing along the savings their deals achieve to consumers, asking repeatedly for a pledge. After the question was repeated three times, Mr. Bertolini said the "savings will be passed along in the price of our products." Mr. Swedish also promised savings. But Sen. Franken noted that he ran out of time to continue, and said, "We could have gone quicker if those answers were yes."

Quizzed about rules tied to its status as a Blue Cross and Blue Shield license holder, Mr. Swedish said that the combined company would maintain the Cigna brand in competing for national employer business, and in markets other than the 14 states where it is a Blue plan. The deal "would in fact make the Cigna brand stronger nationally," he said.

Mr. Pollack of the hospital association argued the Cigna deal would "add to Blue dominance." Ms. Dafny said Anthem and Cigna would be "the same entity" and she didn't "see how that would be competition."

Sen. Amy Klobuchar, a Minnesota Democrat, asked the two CEOs to explain "why you have to have these mergers to get to where you want to be?" Aetna's Mr. Bertolini acknowledged that his company could eventually reach its goals without the merger, but said it would take years longer. Mr. Swedish emphasized the cost savings and synergies his deal would bring.

Sen. Orrin Hatch (R., Utah) asked about statistical data showing the insurance markets would be more concentrated after the merger. Mr. Bertolini said market concentration was just one measure. As he looked at markets where Aetna and Humana compete, "we see plenty of competition, we see plenty of entrants," he said.

Write to Anna Wilde Mathews at anna.mathews@wsj.com and Brent Kendall at brent.kendall@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

September 22, 2015 12:35 ET (16:35 GMT)

Cigna (NYSE:CI)
Historical Stock Chart
From Mar 2024 to Apr 2024

Cigna (NYSE:CI)
Historical Stock Chart
From Apr 2023 to Apr 2024