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Cigna CEO defends Anthem deal, says consumer will still have choice

NEW YORK (Reuters) – Health insurer Anthem’s planned $47 billion takeover of rival Cigna will not hurt consumers but increase choice and affordability, Cigna CEO David Cordani said, defending the merger against widespread criticism that it will harm competition.

The Anthem-Cigna deal and a plan by Aetna Inc to buy Humana have come in the wake of the implementation of the Affordable Care Act and amid pressure on insurers to keep healthcare spending down for their biggest customers – employers and the U.S. government.

“It’s going to increase choice, not decrease choice. It’s going to increase affordability, not decrease affordability,” Cordani told Reuters in an interview, saying results-oriented contracts with doctors and hospitals would help consumers be healthier and trim medical spending.

Cordani said the biggest overlap in a combination of their $115 billion businesses is their large employer-based divisions and asset sales may be necessary to win regulatory approval, though he expects that would only be on a limited basis.

“Divestitures through the DOJ process should be modest and manageable. And we’ve leaned on the conservative side of the business case that supports this,” he said, but added it was too early to say what might be offered up.

About 150 million Americans get their health insurance through their employers, many of which are large companies.

In the past few weeks, both the American Medical Association and the American Hospital Association have issued written criticisms of the deal. Congress held a hearing on insurer competition last week and another hearing is scheduled in the Senate next week in which Anthem CEO Joseph Swedish and Aetna CEO Mark Bertolini are scheduled to appear.

The company expects the Department of Justice review to take 12 to 18 months during which it will look at the extent of their overlap in market share for Medicaid for the poor, Medicare Advantage for seniors, individual insurance, small employers and large employers.

Cordani said the detailed nature of the review would show few competitive issues. There was little geographical overlap in their Medicaid and Medicare businesses and he is also not anticipating issues with the individual business, where Cigna is a new player, nor with small employer-based plans.

He added that insurers would not see outsized benefits from cutting costs through their combinations because customers typically demand that spending savings be passed onto them.

So far, Cordani said, employers have been optimistic that the combination will enable them to combine the results-oriented care management programs for diseases like diabetes that Cigna has used to cut healthcare spending in Medicare and commercial plans, and combine them with the Anthem’s strong Blue Cross Blue Shield networks.

“Within that, there may be deemed by the DOJ some overlap that is not acceptable and we’ll deal with that,” he said.

On branding, he said that in a state like Georgia, where Cigna and Anthem both operate, the companies can continue with their Cigna and Anthem branded plans and designs.

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