Anthem: We'll expand our Obamacare offerings if our merger goes through

Anthem announced Wednesday that it planned to expand its Obamacare offerings into nine more states. However, that expansion is contingent on the company being allowed to complete its merger of Cigna, a pending deal which the Department of Justice recently sued to stop. Politico reports:

The company plans to add nine states to its Obamacare participation if the deal goes through, company officials said on a call with investors.

The DOJ last week sued to block Anthem’s proposed $54 billion acquisition of Cigna, citing concerns about harm to competition, and also filed suit against Aetna’s planned $37 billion takeover of Humana.

Meanwhile, Cigna announced Tuesday that it would be expanding into a few new markets. From the Hill:

Cigna, one of the nation’s largest health insurers, said Tuesday that it has filed to offer insurance on the ObamaCare marketplaces next year in Chicago, the Raleigh/Durham area of North Carolina, as well as Northern Virginia and Richmond.

To really appreciate what is going on here you have to step back. The five largest insurance companies in America are UnitedHealth, Anthem, Cigna, Aetna and Humana. UnitedHealth, the largest of the five, announced it was dropping out of most Obamacare exchanges back in April.

At the time UnitedHealth dropped out the word from Obamacare supporters was that it might hurt competition in some areas of the country but ultimately wouldn’t matter too much because the other 4 companies had vowed to stay in. That meant there would be plenty of competition in most markets to keep the program from slipping into a death spiral. The question was why the other four companies, who were also losing lots of money in the Obamacare markets, would stick with the program.

The answer is that the other four insurers had an ulterior motive. Anthem was trying to merge with Cigna and Aetna was trying to merge with Humana. All four remaining big insurers were hesitant to drop their Obamacare business because doing so might cause federal regulators to take a dim view of them. So, as long as the decision on the mergers was still pending, insurers kept saying good things about the future of Obamacare.

Then, last Thursday, the gloves came off. The Department of Justice announced it was suing to prevent both big mergers. Within hours of the DOJ announcement, Humana announced it was pulling back from almost all of its Obamacare exchange business. Next year the company will go from offering plans in 1,351 counties in the U.S. to offering them in just 156 counties.

But if Humana took the stick approach to the DOJ lawsuit, Anthem seems to be taking the carrot approach. The company isn’t threatening to pull back but it is conditioning any future expansion on the completion of its merger. And Cigna, the company it is looking to merge with is expanding into a few new markets.

I don’t have any inside information on the thinking behind this, but it’s not hard to imagine that the people managing the Anthem/Cigna merger looked at the decision made by Humana last week (to drop most of its Obamacare business) and saw an opportunity to play the good cop to Humana’s bad cop. With UnitedHealth out and Humana pulling back, there is a need for someone to fill that void on the exchanges. Anthem is basically saying to the government, ‘we can step up here, if we get what we want.’

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