If there's one state health insurance companies don't want to lose, it's California.
So while industry observers have said they expect federal regulators to approve two potential health insurance megamergers, the strong objection levied against Indianapolis-based Anthem Inc.'s proposed $54 billion acquisition of Connecticut-based Cigna by the California insurance commissioner has to have executives and shareholders of the two companies worried.
Commissioner Dave Jones urged the federal government to block the deal, pointing to the enormous share of the Golden State's insurance market that the two companies control. If the two merge, he pointed out, the newly formed company would be particularly dominant in the self-insured market, accounting for 61 percent of self-insured employers in the state.
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"Bigger is not better for California consumers," Jones said at a press conference. "I urge the Department of Justice to use its authority to block the Anthem and Cigna merger because of its anti-competitive effects."
Although the nod from the feds is obviously the most important step of the merging process, many state authorities have strong powers to restrict what they find to be uncompetitive practices.
Jones does not have the ability to block the merger from going through, and did not suggest any maneuvers the state could pull to stop the merged companies from operating in the Golden State.
In contrast, Missouri's top insurance official announced last month that Aetna and Humana would be barred from selling certain types of insurance in the state if the proposed multi-billion dollar merger between the two companies goes through.
Anthem, like other insurers seeking mergers, has argued that the acquisition will allow them to negotiate better prices with medical providers that will be passed on to its members.
"We do not believe that the California Department of Insurance's opinion is based on the true merits of this transaction," Anthem said in a statement. "We are confident that the highly complementary nature and limited overlap of our organizations that will benefit the complex and competitive health insurance markets will be reviewed on the facts by the Department of Justice and appropriate state authorities."
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