AHA Seeks Antitrust Scrutiny for Health Plan Mergers

John Commins, for HealthLeaders Media , May 11, 2009

Citing "the lack of robust and coherent enforcement policy" for reviewing health plan mergers, the American Hospital Association today called on the federal government to "launch a critical examination of competition and enforcement policy" to see if the mergers violate antitrust laws.

"Providers are the backbone of our healthcare delivery system. Protecting them from current and future abuses of market power by health plans has to be a mainstay of any successful healthcare reform effort," writes AHA Executive Vice President Rick Pollack in a letter "hand delivered" today to Christine Varney, assistant attorney general for antitrust at the U.S. Department of Justice.

"It is essential that the Antitrust Division contribute to that success by taking an active and aggressive role in understanding how health plan market power and consolidation harm hospitals and other providers as well as in challenging conventional thinking and actions about how to approach those problems," Pollack writes in the letter.

Citing an American Medical Association report that 95% of the health insurance market in the United States is "highly concentrated," Pollack says the number of insurers has fallen by 20% since 2000. "These changes were supposed to make the industry more efficient, but instead premiums have skyrocketed, increasing over 87% over the past six years," he says.

Pollack's letter was released today at about the same time that leaders from the AHA, America's Health Insurance Plans, and other leading healthcare trade groups were meeting with President Barack Obama to announce a coordinated effort to trim $2 trillion in healthcare expenses over the next decade.

"The groups who are here today represent different constituencies with different sets of interests," Obama said at the White House event. "They've not always seen eye to eye with each other or with our government on what needs to be done to reform healthcare in this country."

HealthLeaders' calls to AHIP were not immediately returned.

In a separate development, Varney today vowed to step up Justice Department enforcement of antitrust laws after eight years of what she characterized as "overly lenient" enforcement under the Bush Administration, which she said in a speech today "lost sight of an ultimate goal of antitrust laws — the protection of consumer welfare."

"The failing of this approach is that it effectively straitjackets antitrust enforcers and courts from redressing monopolistic abuses, thereby allowing all but the most bold and predatory conduct to go unpunished and undeterred," Varney told the Center for American Progress. "We must change course and take a new tack."

In his letter to Varney, Pollack wants the Antitrust Division to study recent health plan mergers to determine their impact on their market areas, and hold public hearings about the lack of competition among health plans in most markets and the impacts on consumers, providers, and Obama's healthcare reform initiatives.

Pollack says the government should consider the idea that "proposed mergers by plans with preexisting market power should be viewed as presumptively unlawful."

The AHA letter also wants the government to consider whether:

  • Medicare/Medicaid with low reimbursements should be included in the market when determining the competitive effects of a plan merger on hospitals.

  • Government reimbursement programs are an adequate substitute for health plan competition, because of constraints on hospitals' ability to switch to new patients.

  • Several small health plans can be a countervailing force to mergers involving larger health plans.

  • Low provider payments can hinder the adoption of federally mandated healthcare IT.

  • Price discrimination by large plans against some hospitals creates competitive harm.

  • Dominant health plans can wreak competitive harm in ways other than reducing prices below competitive levels, such as adversely affecting the development or adoption of quality protocols or technology tailored to meet the needs of hospitals and the patients they serve.

  • The mergers of health plans with service areas that technically do not overlap because of license or other agreements still pose a risk of competitive harm and, therefore, should be challenged.

  • Limited divestitures are ever likely to be an effective antidote for anticompetitive health plan mergers.

John Commins is a senior editor with HealthLeaders Media.

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