AMA Raises Anti-Trust Objections to Anthem-Cigna and Aetna-Humana Mergers

This week (September 8, 2015) the American Medical Association (AMA) slammed the proposed mergers of Anthem-Cigna and Aetna-Humana calling them, among other things, anti-competitive and in violation of the federal anti-trust regulations.

These conclusions came as a part of a newly released 2015 edition of AMA’s Competition in Health Insurance: A Comprehensive Study of U.S. Markets, which offered an analysis of health insurance competition for 388 metropolitan areas, as well as all 50 states and the District of Columbia. The study was based on 2013 data which had been gathered from commercial enrollment in fully and self-insured plans and includes participation in consumer-driven health plans.

According to the AMA study:

• A significant absence of health insurer competition exists in 7 out of 10 metropolitan areas studied. Using the federal anti-trust guidelines to assess the degree of competition in a given market, these markets are rated “highly concentrated.”
• In nearly 2 out of 5 metropolitan areas studied, a single health insurer had at least 50% share of the commercial health insurance market.
• Fourteen states had a single health insurer with at least 50% share of the commercial health insurance market.
• Forty-six states had 2 health insurers with at least 50% share of the commercial health insurance market. The 10 states with the least competitive commercial health insurance markets were: Alabama, Alaska, Delaware, Hawaii, Illinois, Michigan, North Dakota, Louisiana, Nebraska, and South Carolina. The 10 states that experienced that biggest drop in health insurer competitive levels were: Idaho, Illinois, Iowa, Louisiana, Missouri, Montana, New Jersey, Ohio, Texas and West Virginia.

Effects of Mega Mergers

It is important to remember that the data in the AMA study is from 2013.

With Anthem potentially merging with Cigna and Aetna potentially merging with Humana, the levels of insurer concentration will increase significantly.

According to the AMA, the two prospective mergers would diminish competition in up to 154 metropolitan areas in 23 states.

Said AMA President Steven J. Stack, M.D., “A lack of competition in health insurer markets is not in the best interests of patients or physicians. If a health insurer merger is likely to erode competition, employers and patients may be charged higher than competitive premiums, and physicians may be pressured to accept unfair terms that undermine their role as patient advocates and their ability to provide high-quality care. Given these factors, AMA is urging federal and state regulators to carefully review the proposed mergers and use enforcement tools to preserve competition.”

Anthem-Cigna Merger

Specifically, said the AMA, the Anthem-Cigna merger would further concentrate insurer market power in 85 metropolitan areas in 13 states. The states affected the most were California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio and Virginia.

Combined, Anthem-Cigna would be the second largest health care provider (before an Aetna-Humana combination—which would push Anthem-Cigna to #3) after United Healthcare. The following table illustrates the size of the combined companies based on 2014 data.

Aetna-Humana Merger

According to the AMA, a merger of Aetna (currently the 2^nd largest private health insurer) and Humana (#5) would further erode insurer competitiveness in 58 metropolitan areas in 14 states including Arizona, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Ohio, Texas, Virginia, Utah and Wisconsin.

The following table illustrates the size of the combined companies based on 2014 data.

AMA Versus Big Insurance

This is a clash of the titans.

Anthem, Aetna, Humana and Cigna are mammoth. So, however, is the AMA.

In terms of Washington, D.C. influence, AMA may be the top dog. It is, in fact, the second biggest spender on lobbying in Washington, D.C. behind the American Chamber of Commerce. Between 1998 and 2011, the AMA spent $264 million on lobbyists.

The American Medical Association (AMA) was founded in 1847 and is the largest association of physicians and medical students in the United States.

The AMA is also the source of the CPT coding system which pays most physicians for their work.

The issues it fights for on behalf of its members are legendary. Most recently it has lobbied intensively for:

• The Patient Protection and Affordable Care Act as a step toward providing coverage to all Americans.
• Raising Medicare payments to physicians, arguing that increases will protect seniors’ access to health care. Since the enactment of Medicare, the AMA stated that it “continues to oppose attempts to cut Medicare funding or shift increased costs to beneficiaries at the expense of the quality or accessibility of care” and “strongly supports subsidization of prescription drugs for Medicare patients based on means testing.”
• Changing medical malpractice law to limit damage awards, which, it contends, makes it difficult for patients to find appropriate medical care. In many states, high-risk specialists have moved to other states with such limits. For example, in 2004, not a single neurosurgeon remained in the entire southern half of Illinois. The main legislative emphasis in multiple states has been to effect caps on the amount that patients can receive for pain and suffering. These costs for pain and suffering are only those that exceed the actual costs of health care and lost income.
• Opposing medical clinics in supermarkets and drugstores. The AMA identified at least two problems with in-store clinics—potential conflict of interest, and potential jeopardized quality of care.

So AMA is, in effect, taking the battle against health insurance mergers to their favorite battlefield, Washington, D.C.

Anti-Trust

Aetna responded to the AMA’s allegation of anti-trust issues with this statement:

“The AMA report focuses on competition in the commercial marketplace, which would not meaningfully change following an Aetna/Humana combination given Humana’s very small commercial business. Humana’s focus is on Medicare, a highly competitive segment where consumers can choose from an average of 18 private Medicare Advantage plans, in addition to traditional fee-for-service Medicare, which remains the choice of more than two-thirds (68%) of beneficiaries.”

The American Hospital Association (AHA) disagrees.

The AHA, which mentioned specifically the Medicare aspects of the Aetna-Humana merger in their September 2, 2015 press release, said that the merger of Aetna and Humana would reduce competition under the privately run portion of the Medicare program—Medicare Advantage.

Specifically, the AHA, which represents some 5, 000 hospitals, warned that putting Aetna and Humana together would give Aetna (the surviving company) too much power to raise prices and end choices for senior citizens who buy Medicare Advantage plans.

Enrollment in Medicare Advantage has increased significantly in recent years. Between 2010 and 2014 enrollment was up 42%. With baby boomers entering the Medicare rolls, that growth is not going to slow down.

Said Melinda Hatton, senior vice president and general counsel at the AHA, in a letter to Assistant U.S. Attorney General William Baer in the Justice Department’s antitrust division and U.S. Secretary of Health and Human Services Sylvia Burwell: “The deal will not just eliminate current competition between Humana and Aetna, it will eliminate future competition between them. Humana is the second largest insurer of Medicare Advantage lives in the country. Aetna is the fourth largest.”

Aetna, however, countered these fears by promising in its merger announcement to “drive better value and higher-quality health care by reducing administrative costs, leveraging best-in-breed practices from the two companies—including Humana’s chronic-care capabilities that measurably improve health outcomes for larger populations—and enabling the company to better compete with more cost effective products.”

Umm. Ok.

What makes this even more interesting from an anti-trust standpoint is that in 2008, the Department of Justice ordered Medicare Advantage divestitures in Las Vegas as part of the UnitedHealth Group’s purchase of Sierra Health Services. Then, in 2012, the Department of Justice (DOJ) ordered Medicare Advantage divestitures in 51 counties as part of Humana’s acquisition of Arcadian Management Services, Inc.

That raises a very interesting problem. Said the AHA in its letter to the DOJ: “The scope of the likely competitive harm here is so broad and so deep that the amount of divestitures required to preserve and grow competition may not be feasible from a practical standpoint.”

Time to Go To the Mattresses?

Both the AMA and the AHA are slamming these insurance mega mergers. Clearly, combining four very large health insurers raises profound economic and public health concerns particularly when the analysis moves to specific metropolitan areas or states. Wasn’t health care reform about greater efficiency, lower costs and better quality care? If one part of the health care system—the payers—become monopolistic and largely immune to price or product competition then, it would follow, all of reform is at risk.

The alarms have been raised and both doctor and hospital associations are going to the mattresses.