Anthem and Cigna merger would take innovative insurer out of market, AHA says

Anthem is less willing to innovate to develop value-based reimbursement systems than Cigna, the American Hospital Association told the United States Court of Appeals in a brief filed Thursday opposing the proposed $54 billion merger between the insurers.

Should the merger go through, Cigna -- the more innovative of the two -- would disappear as an independent competitor, the AHA said.

Oral arguments in the merger appeal are scheduled to begin Friday.

The success of value-based reimbursement models depends on the willingness of payers to experiment, innovate, and collaborate with hospitals and physicians to develop new payment methodologies that go beyond the fee-for-service system, the AHA said through attorney Douglas Ross.

[Also: DOJ asks appeals court to block Anthem, Cigna merger]

"The record in this case suggests Anthem has been less willing than Cigna to innovate to develop value-based reimbursement systems," Ross said in the brief. "If Anthem acquires Cigna, that focus on innovation will be lost, to the detriment of healthcare consumers."

Judge Amy Berman Jackson gave the same opinion in her Feb. 8 ruling against the merger, saying the acquisition "would reduce the new firm's incentive to innovate in the relevant market," the AHA said.

The acquisition would reduce competition in the national market, reducing the number of carriers from four to three, the AHA said.

Employers, who pay for most commercial health insurance, are also demanding value-based options, the AHA said.  A Fortune 500 consultant said at trial there is growing interest among large employers in adopting sophisticated technology and continuing innovation to reduce healthcare costs and improve employee health.

"In this environment, Anthem has been challenged to win business," the AHA said.

[Also: American Medical Association tells DOJ not to settle Anthem-Cigna merger]

Its account teams were not really helping clients understand what was driving their costs, according to the brief.

Anthem claims to have the best overall discount position in the market but as a result, has said its competitors have a strong incentive to be more aggressive and flexible with value-based programs.

"By focusing on better health outcomes and innovative patient-centric programs, Cigna can compete with Anthem, even when Anthem has lower rates," the AHA said.

Last week, the Department of Justice asked the United States Court of Appeals to block the deal, saying it would not create the promised efficiencies.

Anthem claims the merger would create a "Cigna product at the Anthem price" and save customers $2.4 billion in medical costs.

Twitter: @SusanJMorse