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Anthem, Aetna defend acquisitions called harmful by hospitals

September 22, 2015
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If both Anthem's deal with Cigna and the Aetna-Humana merger go through, the nation's five largest health insurers will become only three. (IBJ file photo)

Top executives from two of the biggest U.S. health insurers are set to defend deals that will consolidate the industry from five major companies to three, at a Senate hearing to examine antitrust issues Tuesday in Washington, D.C.

Anthem Inc. CEO Joseph Swedish and Aetna Inc. CEO Mark Bertolini will tell lawmakers that consolidation benefits consumers and strengthens companies, that the deals are necessary to succeed in a changing health-care landscape, and that there are many new sources of competition. Their testimony was submitted to the committee in advance of the hearing before the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights.

In July, Indianapolis-based Anthem agreed to acquire Cigna Corp. for about $54 billion and Aetna struck a $35 billion deal for Humana Inc. The deals will be closely scrutinized by lawmakers and regulators, and a group representing U.S. hospitals will say that the transactions are “a blow” to patients and health-care providers that could raise prices for insurance.

“The Aetna and Humana transaction brings together two highly complementary businesses in a sector that will continue to be marked by significant and dynamic competition,” Bertolini said in his written testimony. “Combining these companies will enable us to offer consumers a broader choice of products, access to higher quality and more affordable care, and a better overall experience.”

From five to three

The deals would reduce the ranks of the biggest U.S. health insurers from five to three. UnitedHealth Group Inc. is the largest, with more than 45 million medical customers and $130 billion in annual revenue. There are also many regional and not-for-profit plans, and recent venture capital-backed start-ups like Oscar Health Insurance.

Aetna’s purchase of Humana will help it expand in Medicare Advantage, the U.S.’s privately run version of the health insurance program for people 65 and older. Bertolini, in his remarks, said “robust choice and competition” will remain in the program, and that government profit limits and other regulations would prevent the combined firm from harming consumers.

Swedish focused his prepared remarks on the complementary capabilities of his firm and Cigna in areas like working more closely with doctors and managing specific conditions like cancer. He said the overlap in Anthem and Cigna’s markets is “minimal.”

The American Hospital Association and the American Medical Association have said the mergers will hurt patients by reducing competition and raising prices. The AMA, which represents physicians, said earlier this month that the deals would reduce competition in 154 metropolitan areas, potentially causing premiums to go up and decreasing payments to doctors.

Hospital testimony

The deals could “be a blow to millions of health care consumers, as well as the hospitals, doctors and others who are working to improve quality and efficiency while making care more affordable," AHA CEO Rick Pollack, who’s scheduled to testify, said in prepared remarks. “The unprecedented level of consolidation these deals threaten could make health insurance more expensive and less accessible for consumers.”

Pollack said the government shouldn’t sign off on the transactions unless it can be assured they won’t reduce competition or hurt consumers.

Assistant Attorney General William Baer, who leads the Justice Department’s antitrust division, has said he will assess the industry as a whole to make sure competition is preserved and the mergers don’t lead to higher costs. In past deals, health insurers have had to divest operations in specific geographic areas to maintain competition.

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