Two massive health insurance mergers in the works have reignited a fiery discussion over excessive consolidation. A series of House hearings kicking off this week will look for villains: hospitals, doctors, insurers or, more broadly, the Affordable Care Act.
The American Medical Association has already stoked the flames, releasing an analysis Tuesday that said the pending insurance deals raise antitrust concerns and would lead to higher healthcare costs. Insurers rebuffed the report and called it “fatally flawed.”
This Thursday marks the first of two House Judiciary Committee meetings on the state of healthcare competition. This week's hearing will specifically focus on how or if the ACA has affected provider and insurer competition. Mergers have become commonplace over the past several years in most corners of the healthcare industry.
Later this month, the House will focus exclusively on the two transactions in question: Anthem's $54 billion bid for Cigna Corp. and Aetna's $37 billion proposed acquisition of Humana. If approved, Aetna and Anthem would each have about $115 billion in annual revenue and, along with UnitedHealth Group, create a Big Three in control of a large swath of the government and commercial health plan market.
The Senate will also hold a hearing, on Sept. 22, on the health insurance deals. Aetna CEO Mark Bertolini, Anthem CEO Joseph Swedish, Cigna CEO David Cordani and Humana CEO Bruce Broussard have all been called to testify.
Thursday's meeting features several prominent figures in the industry: Dan Durham, an executive vice president at America's Health Insurance Plans who recently served as the group's interim CEO before Marilyn Tavenner took over; Dr. Barbara McAneny, a board trustee at the American Medical Association; and Rick Pollack, the new CEO of the American Hospital Association. Dr. Scott Gottlieb, a fellow at the conservative American Enterprise Institute, and Thomas Greaney, a law professor at St. Louis University, will also appear.
Political rhetoric has defined the leadup to this week's hearing, as the Republican-led House sought to tie the controversial mergers to President Barack Obama's health reform law, higher medical costs and alleged limitations on care options. The hearing “will add to the growing record of how Obamacare led to each of these results, and why the broken law demands repeal,” House Judiciary Committee Chairman Bob Goodlatte (R-Va.) and Antitrust Subcommittee Chairman Tom Marino (R-Pa.) said in a statement last week.
“The committee clearly has a particular aim in mind, and that is to build a record for continuing to advocate for the repeal of the Affordable Care Act,” said Lee Simowitz, a partner at Baker & Hostetler who focuses on antitrust law.
Democrats have argued consolidation among hospitals, physicians and insurers occurred well before the ACA became law. Policy experts have also said the ACA encourages new forms of competition and collaboration through payment reforms, such as accountable care organizations.
“It would be erroneous to claim that the Affordable Care Act is somehow responsible for anticompetitive consolidation when in fact such mergers and joint ventures are efforts to avoid the pro-competitive aspects of the Act,” Greaney told House lawmakers (PDF) in September 2013.
The political theater doesn't end at the ACA. Providers and insurers have been using the congressional backdrop as another platform to voice their concerns with the opposing party's transactions.
The American Medical Association's latest report said the Aetna-Humana and Anthem-Cigna deals would drastically lessen consumer health plan choices in 154 metropolitan areas within 23 states. The American Hospital Association wrote letters to the U.S. Justice Department raising similar concerns of anticompetitive behavior.
America's Health Insurance Plans countered by saying provider monopolies in local markets have led to the rise of healthcare prices. “The AMA is recycling misleading data that does not accurately reflect the market today,” AHIP spokeswoman Clare Krusing said in a statement Tuesday. “Families and employers in every state have multiple choices of both insurance plans and types of coverage.”
Insurance executives have continually expressed optimism their deals will get the federal government's green light. But antitrust observers note that the Obama administration has had no qualms about discouraging other big mergers, such as Time Warner Cable and Comcast and Sysco Corp. and US Foods. The government also has been very successful in a handful of recent healthcare antitrust cases.
“This is just the beginning. It's the tip of the iceberg,” said David Balto, an antitrust attorney who used to work for the Justice Department and has been critical of Aetna's and Anthem's acquisitions. “I think you're going to get very aggressive scrutiny from the (Justice Department) antitrust division.”
The hearings, however, likely won't have much bearing on the federal government's review. "What the enforcement agencies do with mergers is rarely affected by what goes in Congress," Simowitz said. "These are hearings where people are going to use them for their own purposes."