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Trustees Newsletter Articles
Insurance Mergers and Acquisitions

Conventional wisdom is that the future of the "mega-mergers" between Aetna/Humana and Anthem/Cigna is dependent upon whether the Justice Department will take action to block them on antitrust grounds. But many overlook the fact that individual states, which typically regulate health plans, could significantly alter these proposed mergers.

In general, states have a broader mandate to examine issues raised by the mergers, so instead of just looking at antitrust concerns, states could examine consumer protection issues relating to premium increases or benefits offered. While no one state can unilaterally block the deals, a few working in concert could play a significant role in whether they're ultimately approved. For example, a number of state attorneys general are working with the Justice Department to heighten scrutiny of the proposed deals. In addition, public hearings on the mergers by state insurance commissioners have been held or are planned in numerous states.

The Kansas Hospital Association wrote to both Attorney General Derek Schmidt and Insurance Commissioner Ken Selzer to express concerns regarding the proposed acquisition of Humana by Aetna and Cigna by Anthem. We noted that the insurers involved in these proposed deals operate in the State of Kansas; provide insured and self-funded health insurance products to individuals, as well as small and large businesses in the state; and both Aetna and Humana have a significant presence in the Medicare Advantage market in Kansas. For example, as a result of the proposed Aetna/Humana deal, Aetna would have more than 90 percent of the Medicare Advantage market in the state, a market share that is presumptively anticompetitive.

We also pointed out to Mr. Selzer and Gen. Schmidt that providers in our state are already working collaboratively with willing insurer partners to engage in innovative health care delivery and financing reforms to support accessible, high quality, effective and affordable care. While under current market conditions some insurers have been fairly open and flexible in engaging in such coordinated engagements, we fear that additional efforts to develop collaborative and innovative reform initiatives could be hindered should the proposed insurer deals be approved.

Bottom line—because of this, as well as concerns about reductions in competition and increases in the cost of premiums, we urged the Attorney General and Insurance Commissioner to take an active role in examining the potential acquisitions in order to protect our state's consumers, businesses and providers.