(Bloomberg) — U.S. hospitals are stepping up their bid to stopAnthem Inc.'s takeover of rival healthinsurer Cigna Corp., saying thedeal will increase the dominance ofBlue Cross Blue Shield plans and potentially raise premiums forconsumers.

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The enhanced bargaining power of the Blue Cross plans willundermine competition and should compel the Justice Department tostop the deal, the American Hospital Association wrote in aletter to the department's antitrust chief Bill Baer.

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Read: AMA asks DOJ to block Anthem-Cigna,Humana-Aetna mergers

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Blue Cross Blue Shield is an association of independent insurersoperating across the country.

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Anthem operates health insurance plansunder the brand in 14 states.

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“The acquisition threatens to both reinforce existing barriersto entry and raise new ones, further entrench dominant Blue plans,and exacerbate conditions conducive to abuse of market or monopolypower,” according to the letter, which was dated Monday.

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The hospital group's missive adds a new set of criticisms toprospective mergers that have the potential to remake the U.S.health-care industry.

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Anthem's $48 billion deal for Cigna, together with Aetna Inc.'splanned takeover of Humana Inc., would consolidate the country'sfive biggest health insurers into three.

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By bulking up, insurers would gain more power to negotiateprices with hospitals and doctors, which has fueled warnings fromthe hospital association and the American Medical Association thatthe deals could lead to less choice and higher costs forconsumers.

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Consumer choice

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Baer, whose antitrust division of the Justice Department isinvestigating both mergers, has cautioned that consumer choiceis a bigger priority than health companies' desire to add marketshare and gain leverage over providers like hospitals.

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Matthew Asensio, a Cigna spokesman, referred comments toAnthem.

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Anthem is working with the Justice Department and is confidentthat the U.S. will review the proposed merger based on fact, Anthemsaid in a statement provided to Bloomberg News.

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“Together, Anthem and Cigna, which have limited overlap in ahighly competitive industry, will be in a better position toimprove consumer choice and quality,” Anthem said in the statement.“Additionally, we will deliver for consumers by operating moreefficiently to reduce our own costs, while enhancing our ability tomanage the cost drivers that negatively impact affordability forconsumers.”

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America's Health Insurance Plans, which represents thehealth-insurance industry, said the hospital association's letterfails to reflect the level of competition in the market.

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“It is well established that decades of hospital consolidationhave created many markets in which hospitals can set their pricesat supra-competitive levels,” it said. “It's a bit hypocritical forthem to then claim that they are harmed because they won't offerreasonable prices to new entrants into markets.”

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Bargaining leverage

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Blue Cross plans insure one-third of all Americans and wouldgain an additional 14.7 million people from the deal, an increaseof 14 percent, according to the hospital association.

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Blue Cross plans have been the target of antitrust scrutiny inthe past. In 2010, the Justice Department sued Blue Cross BlueShield of Michigan, saying terms of its agreements with hospitalsprevented other insurers from entering the market and likely raisedcosts for consumers.

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While Anthem would acquire Cigna members around the country andpotentially increase its bargaining leverage with hospitals, thedeal would also strengthen Blue Cross plans in states where Anthemdoesn't operate, according to the AHA.

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That's because under Blue Cross rules, a Blue Cross plan in astate where Cigna also offers coverage would be able to count Cignamembers as its own when negotiating with providers, enhancing itsleverage in negotiating with providers, according to the hospitalassociation.

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Outside of the 14 states where Anthem operates as a Blue Crossor Blue Shield licensee, “the Blues will continue to compete justas they did prior to the acquisition,” Anthem said in itsstatement. “Cigna products will not become Anthem BCBS products instates where we do not have a Blue license,” it said.

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With higher membership numbers for the sake of negotiations withproviders, the Blue Cross plans would gain market power and haveless incentive to pass savings to consumers, according to theAHA.

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Rival insurers in those states could also find it harder tonegotiate the same levels of discounts from providers as largerBlue Cross plans, harming their ability to compete, the groupwrote.

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It cited a Justice Department study that found that insurersneed a large number of enrollees to negotiate discounts and competewith rivals.

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“We expect that the acquisition would increase the Blue plans'incentive and ability to pressure providers to raise theircompetitors' costs,” which would probably lead to higher premiums,the association wrote.

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