FOCUS: Charles Pierce | There's a Reason Someone Is Supposed to Keep an Eye on Massive Mergers
Charles Pierce, Esquire
Pierce writes: "David Sirota has been all over an interesting story of crony capitalism involving a massive $54-billion proposed merger negotiated between Cigna and Anthem, two giant healthcare insurance companies, and the involvement in that merger of a good chunk of Connecticut's political elite, including Democratic Governor Dan Malloy."
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Charles Pierce, Esquire
Pierce writes: "David Sirota has been all over an interesting story of crony capitalism involving a massive $54-billion proposed merger negotiated between Cigna and Anthem, two giant healthcare insurance companies, and the involvement in that merger of a good chunk of Connecticut's political elite, including Democratic Governor Dan Malloy."
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week ago, Forbes informed us that the IBTimes was going through another brutal round of layoffs in its newsroom, cutting at least 30 people from a staff that already had lost 15 people only three months ago. This strikes me as a shame because the IBTimes, through the work of David Sirota, has been all over an interesting story of crony capitalism involving a massive $54-billion proposed merger negotiated between Cigna and Anthem, two giant healthcare insurance companies, and the involvement in that merger of a good chunk of Connecticut's political elite, including Democratic Governor Dan Malloy.
Rather than try to summarize all of Sirota's work on the subject, here are the links to the stories he's produced along with brief summaries of what each story is about.
Increased Pressure On Malloy As Another State Democrat Demands Commissioner's Recusal (IBT, 6/30/16)
Groups Say Connecticut Controversy Requires Federal Intervention As GOP Demands Hearings (IBT, 6/29/16)
Controversy Over Gov. Malloy's Insurance Commissioner Creates Role Reversal For Republicans(IBT, 6/29/16)
Malloy's Regulator Told Ethics Officials She Was Not Involved In Cigna Issues, Even As Her Agency Was (IBT, 6/27/16)
Blumenthal Calls On DOJ To Block Merger While His Home State Spearheads State Reviews (IBT, 6/22/16)
Connecticut Ethics Probe Spotlights Similar Conflict-of-Interest Charges From The 1990s (IBT, 6/17/16)
Connecticut Officials Vote To Launch Ethics Review Of Gov. Dan Malloy's Insurance Regulator(IBT, 6/16/16)
Gov. Malloy Signs Secrecy Bill That Could Shield Insurance Information From Public Release (IBT, 6/13/16)
Dem & GOP Lawmakers Demand Malloy's Regulator Be Removed From Controversial Merger Review (IBT, 6/10/16)
Obamacare Architect Kathleen Sebelius Questions Proposed Healthcare Insurance Mergers (IBT, 6/10/16)
Connecticut Groups Call For Dan Malloy To Remove Insurance Regulator In Anthem-Cigna Merger(IBT, 6/2/16)
Right now, in part because of the work that IBTimes has done, Connecticut politics are at something of a high boil as, around the country, people look with a baleful eye at a merger between two health insurance giants like Cigna and Anthem. On Tuesday, an editorial in the Connecticut Post deplored the lack of transparency that had attended the huge transaction, and the cozy culture within which the merger seems to have been accomplished.
Commissioner Katharine L. Wade's controversial refusal to recuse herself from ruling on the Anthem-Cigna insurance merger has provoked a reappraisal of ethics regulators, who heavily rely on the self-reporting of public officials, and an ethics code that may be clearer to lawyers than lovers of English. No one from the Office of State Ethics challenged Wade when she sought approval on Feb. 26 for her husband, Michael T. Wade, the associate chief counsel for litigation at Cigna, to sell company stock as his options vested from Feb. 25 to March 5—something he would be barred from doing if the commissioner was considering a matter involving Cigna. Wade, a former Cigna vice president of government affairs, did not try to hide the fact that her staff, at that very moment, was reviewing Anthem's 5-month-old "Form A application" to acquire Cigna for $54 billion, a massive transaction involving the second- and fourth-largest health insurers in the United States. "The application is currently under review by Department staff," Wade wrote in an email to the Office of State Ethics. "On behalf of the Department, I signed a contract with an independent economist to assist Department staff in their review of the Anthem Form A application. Presently, there are no Cigna matters before me." Wade declined to say Friday on what basis she concluded there were no Cigna matters before her under the meaning the state ethics code, given that she already has asserted her intention to rule on the merger.
In Washington, Democratic senators, including Richard Blumenthal, Democrat of…wait for it…Connecticut, are looking to squash not only this merger, but another proposed one that would combine Aetna and Humana with a price tag of $33 billion. And the mergers also have drawn the attention of antitrust regulators as well. Per The Wall Street Journal:
In the meeting earlier this month, Justice Department officials outlined key areas where they say a combination of Anthem and Cigna could hurt competition, the people said. A major concern is the national employer market. The Justice officials said they believed the deal would shrink the number of competitors to three from four. In addition to Anthem and Cigna, that list includes Aetna and UnitedHealth Group Inc. Anthem said at an investor conference in May that the national-account business is more competitive than a simple calculation would imply because big employers often divvy up their business regionally among different insurers. Another area of concern, the people said, is the market for individual insurance plans, the coverage sold on the exchanges that are at the heart of the Obama administration's signature health law. Anthem is a major player in individual markets in 14 states. Cigna has a smaller presence but is participating in seven Affordable Care Act exchanges this year and said it plans to expand into new states in 2017.
Meanwhile, out there in the world, some healthcare professionals are getting nervous about what might occur if the merger goes through. In Missouri, for example, the heads of the state's hospital association and the state's medical association co-authored a cautionary letter to The Missouri Times.
An analysis by the Henry J. Kaiser Family Foundation shows that Missouri is one of only five states in which Anthem already has at least a 33 percent share in the individual, small group and large group insurance markets. More specifically, in 21 of 28 Missouri metropolitan statistical areas, Anthem and Cigna would combine to hold more than one third of the total market share. And, in 23 of the MSAs, the merger would create a presumptively anti-competitive market. The same holds true in rural Missouri. Under federal metrics, Anthem and Cigna combined would control more than one third of the total market share in 44 out of 59 rural counties. In 49, the merger would create a presumptively anti-competitive market, and in two others it would result in a highly concentrated market.
This kind of consolidation needs to be regulated very carefully, and all indications from the IBTimesseries are that the merger was being hustled through without even the minimal concerns for obvious conflicts of interest. Right now, healthcare is not a field that anyone ought to try to turn into the Wild Kingdom.
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