Health Insurance Merger Wave:
Why Consumers should be
Concerned and What to do About It
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DAVID BALTO
LAW OFFICES OF DAVID A. BALTO
1325 G Street, NW
Suite 500
Washington, DC 20005
202-789-5424
[email protected]
www.dcantitrustlaw.com
Quote from Senator Barack Obama to the
American Antitrust Institute - 2007
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“The consequences of lax enforcement for consumers are clear. Take health
care, for example. There have been over 400 health care mergers in the last
10 years. The American Medical Association reports that 95% of insurance
markets in the United States are now highly concentrated and the number of
insurers has fallen by just under 20% since 2000. These changes were
supposed to make the industry more efficient, but instead premiums have
skyrocketed, increasing over 87% over the past six years. As President, I will
direct my administration to reinvigorate antitrust enforcement. It will step up
review of merger activity and take effective action to stop or restructure
those mergers that are likely to harm consumer welfare, while quickly
clearing those that do not.”
Topics of Discussion
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 (I) Anthem-Cigna and Aetna-Humana Mergers
 (II) Enforcers & Agency Regulatory Review
 (III) Signs of Good Advocacy
 (IV) Our Actions Taken So Far
I: Anthem-Cigna and Aetna-Humana
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 Anthem-Cigna
 $54 billion transaction, 53 million beneficiaries combined
 Operation of different insurance products in all 50 states
 Considerable overlap in private insurance markets
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According to the American Hospital Association, the merger will reduce
competition for private insurance in 817 metropolitan statistical areas
Analysis by Goldman Sachs finds that the combined entity will have a
51% market share for “national customers”
Anthem is a part of the Blues– the two-thirds rule
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Two-thirds of Anthem’s annual revenue must be generated by services
offered under the Blue mark
Will lead to a reduction in competition between Cigna and Blue plans
I: Anthem-Cigna and Aetna-Humana
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 Aetna-Humana
 $37 billion transaction, 37 million beneficiaries combined—list
includes private insurance, Medicaid managed care, and Medicare
Advantage
 Significant overlaps in Medicare Part D Prescription plans
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Combined over 6 million beneficiaries in stand alone and Medicare
Advantage PDPs
Medicare Advantage– 1,945 plans total, 30% are Aetna or Humana
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Combined 4.4 million beneficiaries (#2 and #4 in the market), overlap in
1,658 counties
Over 50 percent market share in 39 different counties that have at least
10,000+ Medicare Advantage enrollees (Kaiser Family Foundation)
I: Anthem-Cigna and Aetna-Humana
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II: Enforcers & Agency Regulatory Review
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 Review will be based on DOJ/FTC 2010 Merger
Guidelines.
 DOJ will consider effects on competition .
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Merger enforcement should stop competitive problems when
they are just beginning.
Mergers can be challenged only if they have potential effect of
“substantially lessening competition.”
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This means mergers must make competition significantly worse by
giving merged firms the power to raise price, reduce output, or
lower quality.
Views of customers/consumers are very important.
II: Enforcers & Agency Regulatory Review
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 State Attorneys General are also investigating mergers—15
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of them have joined DOJ probe.
Among them are Connecticut, Florida, Iowa,
Massachusetts, and Tennessee AGs.
If merger is deemed anticompetitive, Attorneys General can
bring lawsuits on behalf of state residents under federal
antitrust law.
States can seek documents from parties, depose parties,
and interview third parties and customers.
In some cases, state AGs will file suit against merging
parties even if DOJ does not.
II: Enforcers & Agency Regulatory Review
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 Insurance commissioners can challenge mergers.
 26 commissioners currently reviewing health insurance mergers
 Insurance commissioners can block mergers if they substantially
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lessen competition.
Insurance commissioners can block mergers based on other
factors including market concentration and if the merger is not in
public interest.
Review process is public and transparent, but same review
powers as DOJ/AGs.
Insurance commissioners will also hold public hearings, allowing
interested parties to voice concerns.
Commissioners can utilize remedies beyond DOJ/AGs to ensure
markets remain competitive.
III: Signs of Good Advocacy
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Public Interest Merger Advocacy Tips
 Consumers are Key: Agencies are more likely to
oppose a merger where there are consumer
complaints.
 Key Inquiry: How does the merger make the market
worse? In order to raise concerns about a merger,
must show that the merger is making competition
worse in some significant fashion and explain how
and why.
III: Signs of Good Advocacy
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 Timing: Like voting, advocate early and often.
 Information: Give agencies credible and well
supported information, especially consumer
concerns and information supported by economic
evidence or documents.
 Influence Officials: Not only speak to staff but
engage senior officials, including insurance
commissioners.
 Legislature: Contact members of Congress or the
state legislature, organize letters and hearings.
III. Signs of Good Advocacy
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 Have an endgame solution: What do you want to happen?
Want competition to be “restored.”
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DOJ has relied on divestitures, BUT being called into question by many
including the American Antitrust Institute.
Insurance commissioners can block the deals or request remedies
including regulations like price controls.
 Cultivate relationships: Have contacts in different agencies
(DOJ/AG/DOI) who focus on your issues. Keep them
informed and updated.
III. Signs of Good Advocacy
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Does Consumer Advocacy in Mergers Work?
Yes
and
and
IV: Our Actions So Far
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 Critical to engage in consumer review at every level, views of
consumers are very important
 We have submitted comments expressing concern about these
mergers on behalf of consumer groups and unions in various states-Florida, Virginia, California, New York, and Ohio
 Comments stress adverse effects of mergers. Mergers will reduce
competition, result in higher costs for consumers, limit consumer
choice. Promised efficiencies unlikely to help consumers. Entry to offset
harm is suspect.
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Are also mobilizing consumer groups, unions, and other interested parties to
raise concerns about these mergers
Tracking developments in other states.
The Coalition to Protect Patient Choice
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www.thecppc.com
Conclusion: Questions?
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