The managed-care industry resembled a punching bag last week as health insurers in at least three states were pummeled by critics calling for crackdowns on continued industry consolidation and rising insurance rates.
The American Hospital Association took an uncharacteristic swing at UnitedHealth Group by urging federal antitrust regulators to investigate and potentially block the insurance giants planned $2.6 billion acquisition of Las Vegas-based Sierra Health Services.
In Pennsylvania, members of Congress held hearings in Philadelphia to discuss the competitive effects of a planned merger between Pennsylvanias two largest health insurers, Highmark and Independence Blue Cross.
And in California, some lawmakers and consumer groups were pushing to boost state oversight of health insurers rates.
The moves add to the pressure on insurers, which are already under the gun from Congress because of the Medicare Advantage program (See story, below).
The AHA, in an April 10 letter to the Justice Department, warned regulators that the Sierra merger, announced last month, would give UnitedHealth a virtual monopoly over much of Nevadas health insurance market, allowing it to slash payment rates to providers and dictate contract terms. Consolidation on the payer side has the potential to create must have payers who represent so large a share of any providers business that the provider has no alternative but to adopt the programs and initiatives of that payer to the exclusion of others, Richard Pollack, the AHAs executive vice president of advocacy and public policy, wrote in the letter.
The American Medical Association already urged regulators to reject the deal in a letter dated March 19 to U.S. Attorney General Alberto Gonzales. Consumers for Health Care Choices, a Hagerstown, Md.-based advocacy group, has also pressed Gonzales to scuttle the deal.
The proposed buyout of Sierra is particularly alarming for local providers because it would give UnitedHealth control over 80% of Nevadas commercial HMO market and a full 94% of the commercial HMO market in Clark County, where Las Vegas is located, the AHA said (See chart). And according to data from the Nevada State Health Division, the combined company would wield full control of Clark Countys Medicare market.
But UnitedHealth spokesman Tyler Mason said the AHA and AMA have taken a simplistic view of the Nevada market, focusing solely on the fully insured HMO segment while excluding other insurance fragments, where there is lots of competition. The groups, he added, have also overlooked the value the merger would create for consumers by giving them access to a fuller range of products and a broader network of providers.
Theyre taking a quick perusal of the market and saying, Oh, we should be anxious. But thats not really doing due diligence of what consumers are going to need, much less demand, Mason said.
Meanwhile, Pennsylvanias two largest health insurers, Highmark and Independence Blue Cross, were forced to defend their proposed merger last week at a U.S. Senate Judiciary Committee hearing. Sen. Arlen Specter (R-Pa.) called the hearing April 9 to examine the competitive effects of the deal, which, according to state data, would give the combined company control over 53% of Pennsylvanias insurance market. The merger, announced March 28, would create the nations third-largest health insurer based on premium revenue (April 2, p. 10).
Responding to intense grilling by providers, consumers and lawmakers, Independence President and Chief Executive Officer Joseph Frick testified that the merger would not reduce competition because the two insurers have virtually no geographic or customer overlap. Highmark and Independence dont compete and never have, Frick said.
Yet Republican state Sen. Don White of Pennsylvania remains skeptical. In my own district, Ive seen the problems providers and consumers face from a lack of competition in health insurance. It can lead to some real predatory practices, said White, a former insurance broker. White co-sponsored a bill, passed by the state Senate in late March that would give the Pennsylvania insurance commissioner power to approve or reject mergers involving not-for-profit insurers. Currently, only for-profit mergers are subject to state oversight.
In California, Democratic state Assemblyman Dave Jones last week unveiled new legislation that would require insurers to obtain state approval for annual premiums increases exceeding 7%. Proposed rate increases would be denied if they were deemed excessive or unfair following a public review process. Proponents say the legislation is especially important now, in light of Gov. Arnold Schwarzeneggers universal healthcare proposal, which would require all Californians to buy insurance coverage.