How might the Anthem/Cigna merger affect their health plans?

Cigna CEO David Cordani: ACA Marketplace Is Still In ‘Version 1.0’

By Julie Appleby
Kaiser Health News, December 7, 2015

Cigna CEO David Cordani says the individual market created by the 2010 health law would be better off if insurers were given more flexibility in designing coverage, as well as a more compressed, focused open enrollment period.

If Cigna’s deal is approved (merger of Anthem and Cigna), Cordani is expected to remain with the new company as president and chief operating officer.

Excerpts from his interview by Julie Appleby:

“We’ll take their leading Medicaid program and our leading Medicare program and put them together to design solutions for the dual-eligible population.”

“In terms of employer marketplace, we will be able to bring population health and management programs to their employer programs and help expand the geographic footprint.”

“Societally, we are just starting to understand how the market is operating. What is the other market with some similarity? Medicare Advantage [the private alternative to traditional Medicare]. It has a one-time limited enrollment period [that is shorter than the ACA] — I think that’s a good thing. Compress the enrollment period, focus it and have a limited number of exceptions.”

“Secondly, [provide] more flexibility on how [insurers’ provider] networks are designed.”

“What Medicare Advantage shows us is by offering more choice, and choice is not necessarily different names of insurers, but benefit designs and network configurations, you get the right choice for you … as opposed to socializing things down.”

“[The market] has to also have a real focus on transparency [for consumers]. It can have more choice aided by transparency [and] network visibility for individuals to understand what they are buying before they sign up.”

“If [insurers] are allowed more flexibility in benefit and network configuration, we’re probably going to get solutions that are much more relevant to a part of the population that is not buying.”

“What we know is if [a patient is] asthmatic and more actively managed, the health outcomes and therefore the affordability can be quite different. This is a case where if you have a chronic illness, you need to be in a management program.”

Question: What is Cigna’s concern with gold products?

“Adverse selection. [It’s not that policyholders] are necessarily older or sicker. The whole way the benefits are configured and the way marketplace is working — the performance of those plans — is much less reasonable than all the other plans. Either there will be more flexibility to configure them in a way to make them sustainable or there won’t be gold plans.”



By Don McCanne, M.D.

Skimming through the comments of Cigna CEO David Cordani, it comes as no surprise that, with the Anthem/Cigna merger (approved by the shareholders last week), plans are being laid to enhance the business advantages of the corporation to the detriment of the plan participants.

Squeezing enrollment (favoring the healthy), reconfiguring provider networks (impairing access for the sick), reducing spending on Medi/Medi dual-eligibles, selling more patient management programs, and using benefit design to fragment risk pools are the types of policies that we have come to expect from the private insurers. Works well for them.

In this interview, there are a couple of points that demonstrate the problem described in yesterday’s Quote of the Day on information frictions and how they impact adverse selection (concentrating high-risk individuals in a single plan). The more information the purchaser of an insurance plan has, the much greater is the possibility that it will lead to adverse selection.

Cordani says that the market must have a focus on transparency for consumers. With greater transparency, patients with high health care needs will select plans that have the greatest actuarial value - plans that pay the highest percentage of the health care costs. In the exchanges, those are the gold plans. They pay 80 percent of the costs, as opposed to 60 or 70 percent for the bronze and silver plans respectively.

As we learned yesterday, it is essential to have effective risk-adjustment transfers to correct for adverse selection that results from patients understanding the benefits of the plans that they purchase. Well informed, high-risk patients will be concentrated in the gold plans, but since we do not have tools that adjust risk adequately, the insurers will be exposed to the greater risk of adverse selection impacting the gold plans.

So what is Cordani’s solution? Either provide “more flexibility to configure them in a way to make them sustainable,” or eliminate them. Configuring them to make them sustainable is, of course, code language for screwing up the benefits so they it becomes more difficult for patients to access the care that they need. If they can’t screw them up enough, then just get rid of them.

Yesterday’s message on information frictions was a challenging read, but it does show that academics with a heart, such as Benjamin Handel and his colleagues, do have something to offer the policy community. Those who might be interested but passed over yesterday’s message because of its complexity may want to take another stab at reading it. It’s an important concept to understand. It is posted at: