The near-certain possibility that the Affordable Care Act will be bulldozed and replaced by the incoming administration means the nation's largest insurers are consolidating amidst a very different landscape than the one they viewed when they first proposed some of the industry's largest tie-ups ever.
And that raises the stakes in the U.S. Department of Justice's antitrust cases against the Aetna-Humana and Anthem-Cigna mergers, which would take the country's five largest insurers to three. Those federal hearings have both wrapped up as of this week, against the furor over what will be done to ensure millions of newly insured Americans aren't left in the lurch.
“From a legal point of view, the DOJ is not going to look at things any differently, but from a policy point of view, if certain features of the ACA are changed or abolished, the consequences of a merger would be different,” said Mark Pauly, who teaches healthcare management at the University of Pennsylvania's Wharton School.
The stakes in preserving competition in the Medicare Advantage market have grown, experts agreed. The Justice Department challenged the Aetna-Humana tie-up, saying it would reduce competition and raise prices in Medicare Advantage plans—the private, managed-care version of traditional Medicare. Those plans have been lucrative for insurers as enrollment soared in the past few years, though it has slowed recently.
Some key GOP lawmakers favor expanding the Medicare Advantage market. House Speaker Paul Ryan, for instance, has proposed turning Medicare into a premium-support system, where beneficiaries would receive vouchers to purchase a private plan or traditional Medicare coverage. In a less regulated Medicare Advantage market, enrollment would explode.
“It's hard to know how the courts would look at the change in environment,” Pauly said, speculating how a less regulated market might behave. “My advice to them would be to give even greater scrutiny to a Aetna-Humana merger because that's going to be occurring in a market that's already profitable, and if it's going to be able to operate well you need to be able to sustain competition.”
Anthem initially argued that it needed to merger with Cigna to compete with consolidating healthcare providers—many of which merged as a way to control costs and form partnerships that would allow them to follow the ACA's tangential mission to move away from fee-for-service and into value-based care.
To be sure, both insurers and providers were already consolidating pre-ACA to grow market share and profits.
But if the regulations under the ACA disappeared, it raises the question; would providers and insurers still have the urge to merge? Anthem and Cigna declined to comment. A spokesman for Aetna declined to comment on the record.
Any GOP replacement plan is likely to promote health savings accounts, which President-elect Donald Trump personally endorsed. HSAs are linked to high-deductible health plans that, in theory, encourage people to shop around for medical services because they have more “skin in the game.”
In that case, “You'd think that the (court's) analysis should be the same or even more vigilant because you're going to have scenarios in which consumers are going to be shopping around for the best plans and deals from hospitals because they are going to have copays and responsibilities and rely heavily on HSAs,” Thomas Greaney, a St. Louis University law professor and former assistant chief in charge of healthcare antitrust enforcement at the Justice Department.
On the other hand, if repealing the ACA means there will be fewer regulations on the insurance industry, that could spur new insurance companies to enter the market and provide even more competition for the merging insurers, said Martin Gaynor, a former director of the Federal Trade Commissioni's Bureau of Competition and now an economics professor at Carnegie Mellon University.
Given the lack of clear plan on how to replace the ACA, most sources say there's a lot of uncertainty facing the insurance industry.
Andrea Murino, partner and co-chair of the antitrust group at law firm Goodwin Procter, said that legally, however, the federal judges presiding over merger cases “will only be able to look at the law as it stands.” They must determine whether the mergers are anti-competitive without speculating about how the insurance industry or markets could change once the ACA is repealed, she said.
The budget resolution bill introduced this week in the House gives a deadline of Jan. 27 to come up with a plan to cut billions off the deficit as a way of cutting off funding for the ACA. The judges deciding on the insurance megamergers are expected to rule before the end of the month as well.
If the ACA is nixed before the judges decide, it's possible they could ask the insurers to weigh in on the effects of repeal on the markets, Murino said.
It's doubtful Trump, who hasn't publicly weighed in on the mergers, will directly influence the courts' decisions since he'll just have taken office.
However, if there's an appeal in the outcome of either case, Trump's appointment to the Justice Department's antitrust division may have to decide whether to keep suing to block the mergers.
“Will President-elect Trump be aggressive in pursuing antitrust action in healthcare or anywhere else, or be much more permissive? I would bet on the side of permissiveness given the president-elect's background,” Pauly said.