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Hospitals Take Aim at Big Health Insurance Mergers

By Jad Chamseddine, CQ Roll Call

August 7, 2015 – The American Hospital Association (AHA) has urged a review of the recent spate of health insurance mergers, raising concerns that massive consolidation would ravage competition and harm the commercial health insurance industry.

In a letter to Assistant Attorney General Bill Baer of the Justice Department, released on Aug 6., the association said proposed mergers between four of the five major health insurers would be a radical shift for the industry. In the past month, Anthem Inc. announced it will acquire Cigna Corp. for $54 billion and Aetna Inc. said it will buy Humana Inc. for $37 billion.

AHA — the largest trade organization representing hospitals, health systems and other health care organizations—said it would address the mergers in separate letter, focusing on the larger tie-up between Anthem and Cigna.

The trade group urged the Justice Department to "thoroughly investigate" the merging companies due to their size and scope. "The potential harm to consumers from this loss of competition is large and durable," the organization said. "Because the two companies generate more than $100 billion in combined revenues, even a modest price increase would cost consumers billions of dollars in higher health care costs."

AHA says the deal would reduce competition for the sale of commercial health insurance in 817 markets serving roughly 45 million consumers. An equation used by the Justice Department and Federal Trade Commission to measure market concentration indicates the deal would enhance market power of the combining companies, it said.

"The risk of harm to these tens of millions of consumers is further enhanced because new entry is unlikely to prevent, or even partially offset, the transaction's potential anticompetitive effects," the trade group said.

The government often requires merging parties to divest assets and sell them to third-party competitors to lessen the anticompetitive effects of a tie-up. AHA argues that in this case, the high barriers to entry and lack of competitive alternatives in several markets make divestitures an unlikely possibility. Any "fix" suggested by the merging parties should be examined closely, it said.

The merger has been criticized by several other health lobbies, including the American Medical Association and the American Academy of Family Physicians, both urging action by antitrust regulators. Sen. Richard Blumenthal, D-Conn., urged Baer to review health insurance mergers in a larger context and emphasized the importance the decision will have in shaping the health care market.

The House Judiciary Committee and The Senate Judiciary Antitrust Subcommittee expected to hold hearings in early September.

AHA also brushed away comparison between health insurance mergers and a recent spate of hospital mergers, saying that the "size, scope and enduring impact" of health insurance mergers differ fundamentally.

"Hospital realignment is essential to providing patients with high-quality, well-coordinated care, and it's contributing to lower cost growth," AHA General Counsel Melinda Reid Hatton said in a post on the organization's website on Aug. 3. The FTC has cracked down on hospital mergers, successfully blocking several transactions and forcing divestitures or complete separation of combined entities.

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