Aetna CEO: 10,000 Humana employees to get raise to $16 per hourWashington — The leaders of two major health insurers planning separate multi-billion dollar acquisitions made the case for the deals to Congress as senators questioned whether they would hurt competition and raise prices for consumers.Pay for about 10,000 Humana employees will be lifted to $16 an hour after the deal closes, Aetna CEO Mark Bertolini said in written testimony submitted for a U.S.Five years after the Affordable Care Act helped set off a healthcare merger frenzy, the pace of consolidation is accelerating, transforming the medical marketplace into a land of giants. Blue Cross-Blue Shield insurer Anthem plans to buy Cigna for $48 billion, and rival Aetna is looking to buy Medicare Advantage coverage provider Humana for $35 billion.
The trend is under a new spotlight now, as congress zeros in on the competitive and cost impact of proposed deals that would collapse the health-insurance industry’s top five players into just three massive companies, each with more than $US100 billion ($140bn) in annual revenue. Senate Judiciary Committee. “As a result of this policy, we expect approximately 10,000 of Humana’s employees to get a raise to $16 per hour once we integrate the compensation structure of the two companies,” Bertolini said, according to the prepared remarks. The Justice Department must pass judgment on whether the mergers would make the companies so dominant that they could create a competitive imbalance and push already high health-care costs even higher. Next year, the company plans to cover a larger share of workers’ health-care costs, based on income, Bertolini said, helping some save as much as $4,000 a year.
Aetna has said that Louisville will be the headquarters of its government insurance business and that the city will have just as many — if not more — jobs after the sale. Mark Bertolini, CEO of third-largest U.S. health insurer Aetna Inc., testified “robust choice and competition will remain in the Medicare market” after the acquisition of Humana. The managed-care deals parallel what has been happening among healthcare providers — 2015 is on pace to notch the most US hospital deals since 1999, with 71 announced through the end of August, according to Irving Levin Associates, a research firm that tracks healthcare transactions. But insurance companies argue that the deals will allow them to work with medical providers to prevent costly hospital readmissions, reduce duplication of services and promote preventive services such as immunizations and cancer screenings that lead to better health outcomes and lower costs.
That comes on top of a torrid spate of deal-making — in 2010, the year the health law passed, there were 72 hospital acquisitions, up from just 50 the year before. If the mergers close, the combined Anthem-Cigna would have 53 million covered lives, eclipsing UnitedHealthcare UNH, -0.83% , which covers 49 million, as the nation’s largest health insurer by membership. Bertolini testified that, “Aetna and Humana share a common culture,” and the drive to merge was driven by the hopes of “creating positive change in the health care market.” Swedish, the chief executive of Anthem, said his company’s merger with Hartford-based Cigna “will uniquely benefit consumers” by expanding access to care through a more extensive network of doctors and hospitals.” Richard Pollack, president of the American Hospital Association, testified the mergers, which would shrink the five largest insurers to three, “could be a blow to millions of health care consumers, as well as as the hospitals, doctors, and others who are working to improve quality and efficiency while making care more affordable to patients.” Leemore Dafny, a health economist at Northwestern University and former Federal Trade Commission official, cited the 1999 merger between Aetna and Prudential. George Slover, an attorney with Consumers Union, also criticized the mergers, saying it would harm consumer choice and the ability of other insurance companies to thrive and move into new markets.
A $16 hourly wage means an annual income of $33,280 for a full-time employee working 40 hours a week, 52 weeks a year, compared with $15,080 at the federal minimum wage. Anthem, a Blue Cross and Blue Shield insurer, wants to buy all of Cigna’s shares in a cash and stock transaction that would cost $54 billion and cover 53 million members.
Aetna and Humana on Friday both received “second requests” for further information in connection with the Justice Department’s review of the proposed mergers for potential anticompetitive issues. Insurers say these combinations can help them save money by cutting overlapping costs and improving their technology, which is becoming more important in monitoring patient health and helping customers find care. Dowling, CEO of New York’s North Shore-Long Island Jewish Health System, which is changing its name to Northwell Health. “The big providers are going to compete on quality and service and price.” But the prospect of combined companies has some consumer groups wary of reduced competition, which they say could drive up premiums while doing little to improve customer service, data security and the accuracy of doctor directories. “When big [companies] like this join forces rather than compete, it’s always a worry in terms of choice,” said Betsy Imholz, special projects director for Consumer Reports. “History has generally taught us when there’s greater concentration of health insurers, premiums are higher.
Al Franken, D-Minn., when they gave lengthy responses to his question: ”Do you commit to passing on your savings to policyholders?” “I am deeply concerned about these mergers because of their potential effect on competition and the consolidation of power in fewer hands,” he said. Blumenthal questioned Bertolini on the issue of “barriers to entry” of new and smaller companies into the market place, especially the small group and individual markets. The possible impact of these big acquisitions on consumers is murky and likely won’t be felt for at least a year because insurers have already ironed out most of their plans for 2016 coverage. Bertolini responded that more providers are entering the market on the local level and Wall Street is making investments in insurance startups, including Google Capital’s investment in the new Oscar Health Insurance Corp. Richard Blumenthal, D-Conn., told the CEOs. “I’m deeply troubled by the evidence that shows that neither (health care) providers nor consumers benefit from these mergers.” Blumenthal said both proposed mergers raise “serious competitive concerns” and expressed skepticism that cost savings realized by the companies through the combinations would be passed on to consumers.
Thom Tillis, R-N.C., joked “market concentration is what I do when I’m at the grocery store and trying to figure out what my wife asked me to buy when I went there.” Swedish noted that a small insurer named Oscar started up to serve the New York and New Jersey markets and accumulated 45,000 customers in its first year.