(WORT)–In early March, U.S. Assistant Attorney General William Baer told members of Congress that the U.S. is not in the midst of a wave of mergers. The country is facing a tsunami.
“The parties who are anxious to maximize shareholder value want to get a deal done and they’re often willing to throw out some conduct promises or some modest structural remedies. We need to scrutinize those carefully,” Baer said.
One of the mergers Baer, an antitrust lawyer, says the Department of Justice has been scrutinizing is that of Aetna and Humana, two of the nation’s largest health insurance companies. Taken together with the parallel merger of two other health insurance giants, Cigna and Anthem, Baer said the Aetna-Humana deal would be a “game changer” for the industry.
Last July, Aetna announced it would seek to acquire Humana for about 38 billion dollars, saying the consolidation would result in greater savings. Aetna hopes the deal will be final by the end of 2016.
Consumer advocacy groups and labor unions in Wisconsin are particularly concerned about how the merger will impact people locally.
Robert Craig of Citizen Action of Wisconsin says the merger could raise the cost of health insurance in the state, which already has some of the highest rates in the country. It could also cost over 3,000 jobs.
“Academic research shows that these mergers generally cause health insurance rates to go up [because the companies] end up having the leverage to charge consumers and employers more, and the savings they claim they’re going to get through consolidation are never passed on to the consumer,” says Craig.
“The other concern here is that Humana employs a large number of people in Wisconsin… and with this consolidation those jobs are at risk of being outsourced to another state,” he adds.
Craig says Wisconsin’s Commissioner of Insurance, Ted Nickel, is in a unique position to either block or place conditions on the merger, adding that what happens here over the next month could have national implications.
“They could require that there be no rate increases because of the merger… They could require [the merged company] to participate in the federal exchange under the Affordable Care Act. They could even require that there be no reduction in the workforce in Wisconsin,” Craig says.
“People all over the country are watching the Wisconsin process because this is one of only a couple of states that is considering the Aetna and Human merger,” he says.
Florida was another one of those states. Last month, insurance regulators there gave the merger the greenlight with some conditions, ignoring concerns raised by the American Medical Association that the merger would severely reduce competition in the Medicare market.
Kristin Forsberg, a financial expert with Wisconsin’s Office of the Commissioner of Insurance, says the state’s review process has many phases, including a formal hearing scheduled for next week. Given the complexity of the Aetna merger, Forsberg says the process could drag on longer than usual.
“We make our recommendation from the financial bureau, then the hearing examiner makes a proposed decision to the commissioner, then the commissioner reviews that as well as my recommendation memo and then makes the final decision on the transaction.”
Forsberg says that after conducting a financial analysis of the merger’s likely impact to the state, she recommended it for approval. She says the transaction didn’t raise any red flags for antitrust violations since Aetna has a relatively “small presence” in the state of Wisconsin.
The insurance commissioner’s office is currently considering whether to allow David Balto, a Washington DC-based public interest lawyer, to participate in next week’s hearing. Balto is requesting to pose questions to Aetna-Humana representatives on behalf of Citizen Action and healthcare workers’ union SEIU. Robert Craig says the purpose of Balto’s questioning would be to draw attention to the many other costs of the merger that the Office of the Commissioner of Insurance may not have factored in yet.
The hearing is scheduled for March 30th at 1pm in Madison.