States hold key role in big in­surer merg­ers

Modern Healthcare - - NEWS - By Lisa Schencker

The U.S. Jus­tice Depart­ment’s an­titrust probe of two mas­sive pro­posed in­sur­ance merg­ers has dom­i­nated the spot­light as hos­pi­tals, doc­tors and law­mak­ers fret over the im­pact of al­low­ing An­them to ab­sorb Cigna Corp. and Aetna to swal­low Hu­mana.

But in­sur­ance reg­u­la­tors in most states also have a shot at de­rail­ing or mod­i­fy­ing the deals and will spend the first half of 2016 crunch­ing data and hold­ing pub­lic hear­ings.

The in­sur­ers won’t be able to merge in states that turn down the pro­pos­als. That means re­jec­tions from even a few of the most-pop­u­lous states could break the deals by di­lut­ing their fi­nan­cial fea­si­bil­ity.

“A hand­ful of com­mis­sion­ers really could stop it na­tion­wide,” said John Ox­en­dine, a for­mer Ge­or­gia in­sur­ance com­mis­sioner.

Peter Pavarini, im­me­di­ate past pres­i­dent of the Amer­i­can Health Lawyers As­so­ci­a­tion, agreed that sce­nario “could be a show­stop­per.”

Aetna has said it is con­fi­dent its pro­posal “will re­ceive a fair, thor­ough and fact-based re­view from the Depart­ment of Jus­tice and the states.” So far, Michi­gan, Utah and Ver­mont have ap­proved it.

An­them said in a state­ment that it’s hav­ing “col­lab­o­ra­tive and pro­duc­tive con­ver­sa­tions” with state lead­ers.

The Jus­tice Depart­ment’s anal­y­sis will fo­cus mainly on the merg­ers’ ef­fects on com­pe­ti­tion. But state laws call on in­sur­ance com­mis­sion­ers also to as­sess whether the merg­ers would hurt pol­icy hold­ers or the pub­lic, said Jay An­goff, a for­mer Mis­souri in­sur­ance com­mis­sioner and New Jer­sey deputy in­sur­ance com­mis­sioner.

It’s a broad stan­dard that gives state in­sur­ance com­mis­sion­ers wider author­ity than the fed­eral an­titrust en­forcers. They can set con­di­tions such as freez­ing or lim­it­ing pre­mium in­creases for set pe­ri­ods of time.

Also, state in­sur­ance com­mis­sion­ers, un­like the Jus­tice Depart­ment, must hold pub­lic hear­ings. “They have a process that’s trans­par­ent, and I think that trans­parency really helps pro­tect con­sumers,” said David Balto, an an­titrust at­tor­ney and for­mer pol­icy di­rec­tor of the Bureau of Com­pe­ti­tion at the Fed­eral Trade Com­mis­sion. Balto re­cently helped launch a group that’s fight­ing the merg­ers.

Most of the states af­fected by the deals have not yet held their pub­lic hear­ings, but will likely do so in com­ing months, said Ana Gupte, se­nior an­a­lyst for health­care ser­vices with Leerink Part­ners.

Florida held its hear­ings last week. Its ap­proval is par­tic­u­larly im­por­tant to the Aetna-Hu­mana merger be­cause of Hu­mana’s con­cen­tra­tion in Medi­care Ad­van­tage plans and the state’s large num­ber of se­nior cit­i­zens.

In­sur­ance com­pany rep­re­sen­ta­tives, an econ­o­mist and lawyers took turns at the mi­cro­phone as Florida of­fi­cials pep­pered them with ques­tions about how the merg­ers would af­fect tech­nol­ogy, provider net­works and com­pa­nies’ fi­nances. None of the few who of­fered pub­lic com­ments at the hear­ings ar­gued ex­plic­itly against the deals.

Gupte said she thinks Florida will ap­prove both merg­ers but will re­quire di­vesti­tures in the Aetna-Hu­mana deal. Florida’s bless­ing would be “a lead­ing indi­ca­tor” of how the Jus­tice Depart­ment and other states might view the Aetna-Hu­mana merger, she said. Gupte pegs the chances of the Aetna-Hu­mana merger clos­ing at about 75% and the An­them-Cigna merger at 60%.

The in­sur­ers have been lob­by­ing state com­mis­sion­ers hard in re­cent months, Ox­en­dine said. In­sur­ers can be es­pe­cially in­flu­en­tial in the states where they are based, An­goff said. Hu­mana is head­quar­tered in Ken­tucky, An­them in In­di­ana, and both Aetna and Cigna are head­quar­tered in Con­necti­cut.

States’ po­lit­i­cal af­fil­i­a­tions might also af­fect the merger de­ci­sions. Demo­cratic states might be more in­clined to give in­sur­ers a tough time, whereas Repub­li­can states might be less will­ing to go against cor­po­ra­tions, Ox­en­dine said.

It’s also pos­si­ble that state in­sur­ance com­mis­sion­ers will ap­prove the deals, but with con­di­tions. In his time as in­sur­ance com­mis­sioner, An­goff said he or­dered lim­i­ta­tions on rate in­creases.

He cau­tioned, how­ever, that a state’s pre­vi­ous ap­proach to a merger doesn’t nec­es­sar­ily in­di­cate how it will act now. “There is no prece­dent among in­sur­ance com­mis­sion­ers for deals that are this big, that af­fect this many states,” An­goff said.

Rich Robleto, deputy com­mis­sioner of the Florida Of­fice of In­sur­ance Reg­u­la­tion, pre­sides over the state pub­lic hear­ing on the Aetna-Hu­mana merger.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.