Health Plans Gray


challenge, which is that in every sector, someone with an MBA comes along and says bigger is better when it comes to revenue and profit,” Gray says. “There’s always going to be a natural tension between providers


and payors.” Gray acknowledges that the Anthem-


Cigna merger would mean fewer choices for some companies. “But the choice they do have will have a lot more leverage,” he says. “The bottom line for them is: How much is this going to cost me, and am I going to get access to a good network? They want somebody who is equipped to get a good deal.” Gray offered this example: Say, you


have a company with locations in six states. Today, it might be able to get a bid


A


from Anthem in three states and a bid from Cigna or one of the few other major insurers in the remaining states. “If this merger happens, in all the places where Anthem is and where Cigna is, they can get one deal, which is more efficient and more effective. That’s the business case for the merger.”


Hospitals, physicians opposed A major voice in the commonwealth


against the Anthem-Cigna merger is the Virginia Hospital & Healthcare Association. Chris Bailey, the group’s executive vice president, made the VHHA argument at a May hearing before the SCC. Anthem already has “a significant concentration in Virginia’s self-insured and fully-insured commercial market,” he told the commission. Plus, Bailey argues that mergers


Aetna to reduce exchange offerings


dding to the merger controversy is an announcement by Aetna in early August that it would


withdraw from 11 of the 15 states where it sells health insurance on Affordable Care Act exchanges. Virginia is one of the four states


where the insurer will continue to sell policies on a health exchange. Aetna’s action has become a flash-


point in the 2016 presidential campaign, sparking debate between Republicans and Democrats over the viability of Obamacare. (In addition to Aetna, other insurers, including UnitedHealthcare and Humana have announced cutbacks in their exchange offerings.) Aetna, the nation’s thir d-largest


health insurer, blamed its decision on losses from the exchanges. Those losses have totaled $430 million since 2014, including $200 million in the second quarter of this year. Democrats, however, question the


company’s motives, pointing to a July 5 let- ter from Aetna’s CEO, Mark T. Bertolini, to the U.S. Justice Department, which was first reported in The Huffington Post. The letter responded to a DOJ ques-


tion about how Aetna’s participation in exchanges would be affected if its merger


38 SEPTEMBER 2016


plans were thwarted. A DOJ challenge to the merger


“would have a negative financial impact on Aetna and would impair Aetna’s ability to continue its support [of the exchanges], leaving Aetna with no choice but to take actions to steward its financial health,” the letter says. Noting the company’s losses since


2014, the letter says, “Our ability to withstand these losses is dependent on our achieving anticipated synergies in the Humana acquisition.” Bertolini says in the letter that, with


the merger, the company had planned to expand its participation in exchanges from 15 to 20 states next year. If the merger is blocked, however, “instead of expanding to 20 states next year, we would reduce our presence to no more than 10 states.” Some Democrats see the letter as


a threat by Aetna in response to DOJ’s opposition to the merger. The Wall Street Journal, however,


says that Bertolini simply was stating financial facts in response to the DOJ’s questions. “Public companies have a responsibility to shareholders, and the wonder is that any insurer is still part of the exchanges,” the newspaper said in an editorial.


Bailey


among hospitals and other health-care providers are different from combina- tions among insurance companies. Health system “integration” has helped improve medical care in a number of areas, Bailey


says. “There are many opportunities for further improvements, but Virginia health-care delivery is moving in the right direction,” he said during his testimony. Health-care providers already have


the weaker hand in many parts of the state when it comes to negotiating fees or getting insurers to help them find new ways to deliver care, Bailey says. “There is no evidence in Virginia’s history, or in other markets, to indicate that allowing an already dominant insurer to gain greater market share and become even more protected against competitive pressures will result in” lower costs or more insurer support for new ways to deliver care, Bailey said in written comments to the SCC.


He also argued that there has been a


steady drop in the annual rate of hospital price increases in recent years, while pro- ductivity has increased. “It is evident that a decade of provider integration has shown measurable improvement in quality and safety” while allowing the Anthem-Cigna merger “will make an already untenable situation that much more problematic for the insured, the public and health-care providers.” The Medical Society of Virginia isn’t


a fan of the merger, either. It polled 198 physicians in Virginia on both mergers and says that 79 percent “felt they had to contract with Anthem” and 55 percent felt that way with Cigna. Only 6 percent of doctors felt they could find enough new Medicare or Medicaid patients to replace the lost income from commercial insur- ance. M edicare and Medicaid payments are generally lower than what commercial insurers pay. Scott Johnson, an attorney from the


Richmond office of Hancock, Daniel, Johnson & Nagle, spoke on behalf of the medical society before the SCC, saying that the Anthem-Cigna merger would lessen competition over prices and discourage other insurers from entering Virginia.


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