Critics of Health Insurer Mergers Urge States to Act

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By Sara Hansard

Nov. 27 — Critics of the planned mergers of four large health insurers into two companies want state regulators to vigorously investigate the impact of the consolidations.

Antitrust attorney David Balto, who has warned against alleged anticompetitive consequences from the proposed mergers of Anthem Inc. with Cigna Corp. and Aetna Inc. with Humana Inc., urged state insurance regulators to investigate the potential mergers at the National Association of Insurance Commissioners meeting Nov. 20.

“States have more power than the Department of Justice” (DOJ) in stopping mergers or getting concessions from merging companies, he told Bloomberg BNA Nov. 24, pointing to the proposed consolidation of Highmark Inc. and Independence Blue Cross in Pennsylvania that was blocked in 2009 by that state's former insurance commissioner, Joel Ario.

Eric Schneider, senior vice president for policy and research at the Commonwealth Fund, told Bloomberg BNA Nov. 25 that state regulators typically have been more active in intervening against proposed mergers of providers such as hospitals in their states, citing the withdrawal of Boston hospital company Partners HealthCare's plan to acquire South Shore Hospital in the face of objections from the state's attorney general. He said that having fewer insurers results in higher premiums for consumers. The Commonwealth Fund is a private foundation that, among other things, supports the Affordable Care Act.

States Have ‘Robust Powers.’

State insurance regulators have “robust powers” to examine the mergers, Balto said at the NAIC's health insurance committee meeting. Under state laws, insurance regulators have broader powers to conduct their own independent, public investigations of the mergers than the Department of Justice's mandate of looking at whether mergers will substantially lessen competition, he said.

State regulators have a mandate to look at whether the mergers would hurt the public interest, Balto said. DOJ officials have less expertise than state regulators do concerning local health insurance markets, and the DOJ's process is not as transparent as state processes, which include public hearings and records, he said.

State regulators also have more remedies they can use to mitigate any anticompetitive effects, Balto said. He suggested that the NAIC health insurance committee form a task force or working group to investigate the proposed mergers, noting that state attorneys general often merge their efforts to investigate mergers.


But California's insurance commissioner, Dave Jones, told Bloomberg BNA Nov. 25 that Balto's proposal to set up a joint NAIC group to examine the mergers wouldn't be workable because “the regulatory authority resides in each state as a result of state statute. Each state that chooses to will be holding hearings, in particular the state insurance commissioners in whose states the insurance companies are domiciled.”

A joint state working group “wouldn't have the requisite authority to do what I believe Mr. Balto was advocating for” in closely examining the proposed mergers, he said.

In California, the Department of Insurance will hold hearings on each of the proposed mergers, looking at their impact on consumer choice, price, competition and on medical providers, among other things, Jones said.

Kentucky's Process

Kentucky Insurance Commissioner Sharon Clark told Bloomberg BNA Nov. 24 that Kentucky, where Humana has a 13,000-employee office, will conduct a public hearing similar to hearings that will be held in other states and territories that would be affected by the mergers.

The state has information on provider networks, and part of the process will be to determine if the merged entities would have sufficient family practitioners and specialists, Clark said. “It gets fairly granular,” she said.

State officials are closer to their residents than federal officials are, Clark said. “We just know our marketplace,” she said.

Clark also said she is having an extra analysis conducted to determine what impact the mergers would have on the Kentucky's state-operated Affordable Care Act marketplace. “So I think I'm doing a pretty thorough review down here,” she said.

Representatives of insurance commissioners in Connecticut, where Aetna and Cigna are headquartered; Wisconsin, where Humana has offices; and Indiana, where Anthem is headquartered, also said they are collecting information from the companies to prepare for public hearings, which will be held in 2016.

Anthem spokesman Leslie Porras told Bloomberg BNA in an e-mail Nov. 25 that, “In addition to the federal regulatory review, Anthem is also moving forward in the process of obtaining regulatory review in 26 states. We are committed to engaging in constructive and transparent dialogue as both the federal and state processes move forward, and will continue to work cooperatively with all relevant policymakers and regulatory entities to complete this transaction. We anticipate the transaction will close in the second half of 2016.”

Aetna spokesman Matthew Clyburn told Bloomberg BNA in an e-mail Nov. 25, “We believe the combination of Aetna and Humana will improve the health care system and offer consumers more choices and greater access to higher quality, more affordable care. Our proposed transaction is primarily about the Medicare marketplace, where there is robust competition and choice. We are confident that our transaction will receive a fair, thorough and fact-based review from the Department of Justice and the states.”

Local Market Conditions Important

State reviews are crucial because “the local market conditions really influence how likely it is that a merged insurer could get concessions from providers,” Schneider said.

The trend in recent years has been toward provider consolidation, said Schneider, who authored a blog posting released Nov. 20 on provider mergers. When hospitals merge, there is “good evidence” that the mergers result in higher prices but not necessarily better quality, he said. Further, “those provider prices get passed along as higher premiums.”

In markets where insurers are more consolidated than providers, insurers are often able to get lower prices from providers, Schneider said. However, insurers “don't pass those savings along to consumers,” he said. The Commonwealth Fund released another study Nov. 20, which found that consolidation in the private health insurance industry leads to premium increases, even though insurers with larger local market shares generally obtain lower prices from health care providers.

The American Medical Association issued a study in September concluding that the combined impact of the mergers would exceed federal antitrust guidelines in as many as 97 metropolitan areas in 17 states . Also in September, American Hospital Association President and Chief Executive Officer Rick Pollack said before the Senate Judiciary Committee that the mergers could make health insurance more expensive and less accessible for consumers.

State Reviews Attractive For Opponents

Thomas Greaney, a professor at Saint Louis University School of Law, told Bloomberg BNA Nov. 24 that “the attractiveness to those who oppose the mergers” in suggesting that state regulators take an active role is that state officials could apply broader standards to look at whether the mergers may stop potentially lost competition. That standard is harder for federal officials to meet in blocking mergers or winning concessions, he said.

“If you've got an extra arrow in your quiver it might make it more likely the parties would abandon the merger if they're likely to face expensive challenges before state insurance commissioners even if they settle with the Justice Department,” Greaney said.

The DOJ should get input from the insurance commissioners in connection with any divestitures, Greaney said. Requiring a health insurer to divest plans is “not like selling a cement factory,” he said. “You really have to buy the network or at least get access to the same network at the same discounted prices.”

Problems with Medicare Advantage Market

Greaney said the “most problematic” merger is the Aetna-Humana merger, because both companies have a substantial presence in the Medicare Advantage market.

Paul Ginsburg, director of public policy at the University of Southern California's Schaeffer Center for Health Policy and Economics, agreed that merger opponents are pushing for state reviews for tactical reasons. “Given that the Justice Department appears to be reviewing the Aetna-Humana and Anthem-Cigna mergers quite seriously and thoroughly, all of the advocacy for state reviews is surprising,” he told Bloomberg BNA in an email Nov. 24. “It strikes me that some opponents of these mergers are searching for additional venues to fight them.”

In these particular mergers, Ginsburg said, “some of the issues seem intrinsically national.” The segment causing the greatest concern in the Anthem-Cigna merger is the self-insured market for large national employers, he said.

To contact the reporter on this story: Sara Hansard in Washington at

To contact the editor responsible for this story: Brian Broderick at

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