(Bloomberg) — New York’s insurance regulator has “significant concerns" about Anthem Inc.’s proposed $48 billion acquisition of rival health insurer Cigna Corp. and will hold a hearing to address them before deciding whether to approve the deal.

The state Department of Financial Services said the planned purchase would reduce competition in the state’s health insurance markets and also hurt the financial health of the companies, according to a letter dated Wednesday and sent to an attorney for Anthem. The U.S. Justice Department already has sued to block the deal on antitrust grounds.

Bloomberg/file photo

“The Department has serious concerns that Anthem’s proposed acquisition of Cigna will adversely impact the competitiveness of the health insurance market and harm consumers in New York,’’ Superintendent of Financial Services Maria T. Vullo said in the letter.

Anthem’s proposed purchase of Cigna is one of two massive mergers that would reduce the ranks of big U.S. health insurers to three from five. The Justice Department also sued to block the other deal, Aetna Inc.’s planned acquisition of Humana Inc. New York approved the Aetna-Humana deal before the suit, conditioned on the deal gaining approval from antitrust regulators.

No hearing date
Rich Loconte, a spokesman for the Department of Financial Services, confirmed that the regulator sent the letter. The letter doesn’t set a date for the hearing, and says a notice will be sent in the “near future.’’ Bonnie Jacobs, an Anthem spokeswoman, had no immediate comment.

In evaluating Aetna’s deal for Humana, New York regulators found that the combination wouldn’t harm competition in the state’s health insurance market but still required the companies to continue to offer Medicare products and not to cut benefits. The regulator didn’t require a hearing on Aetna’s deal.
Both state and federal officials regulate health insurance in the U.S. Approval from state regulators is required in some cases for health-insurance mergers.

The New York regulator said Anthem’s deal for Cigna would give the combined firm almost a third of the state’s commercial insurance market, where employers buy health policies for their workers. Anthem-Cigna would control almost half of the state’s market for providing administrative services to self-insured firms, the regulator said, with a big concentration in Brooklyn, the Bronx and Queens.

Provider payments
New York also said the deal could hurt health-care providers by limiting how much they’re paid. That could lead to fewer options for consumers, the regulator said. And savings from those lower rates may not lead to lower costs for customers, because Anthem would have such a big share of the market, the department said.

“The provider rates would decrease simply because of Anthem’s increased market share,’’ according to the letter. “Based on the history of health insurance mergers, savings from increased negotiating power with providers may not, in actuality, be passed on to the consumer.’’

New York also expressed concerns about whether Anthem can get the necessary financing to acquire Cigna, and what effect that would have on the financial health of a combined firm. And the regulator said that the DOJ action to block the deal creates “additional concerns about the ability of the proposed merger to be viable.’’

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