House panel told of problems with health insurer merger trend

Washington -- The rapid consolidation of the insurance industry in recent years has made the health system less efficient and has harmed patients and physicians, medical organizations told lawmakers at an Oct. 24 hearing.

The American Medical Association asked the House Small Business Committee for help in convincing the Dept. of Justice to disapprove a proposed merger that it believes would add to these problems.

The planned union of UnitedHealth Group and Sierra Health Services is an excellent example of the monopolistic power that mergers create, said AMA Immediate Past President William G. Plested, MD. It would give the new company 80% of the HMO market in Nevada, he said.

"This merger would have a devastating impact on Nevada's patients and physicians, and would reverberate throughout the health care system as a harbinger of unrestricted consolidation," Dr. Plested told the committee, chaired by Rep. Nydia Velazquez (D, N.Y). "It's time to draw a line in the sand and say this is going to stop."

The AMA will consider filing a lawsuit to stop the merger if the Justice Dept. approves it, he stated.

Velazquez said she cannot force the Justice Dept. to reject the merger but will call attention to the case and make sure the proper analysis is performed before the department decides if the deal meets antitrust laws.

"We will use everything we can to make sure they do it and do it right," she said. Velazquez also said she may hold a hearing with the House Judiciary Committee on the Justice Dept.'s role in approving mergers.

Insurer denies monopoly charge

United HealthCare spokesman Tyler Mason said the merger would not give the new company monopolistic powers. There is no distinctive HMO market in Nevada, and employers can choose between several insurance companies, he said.

"Employers search for insurance, not specific products, and it is a fiercely competitive market in Nevada," Mason said.

The merged company would have 28% of the total health care market in Nevada and 35% in Las Vegas, Mason said. But the AMA states the combined company would have 48% of the market share in the state and 60% in Clark County, home of Las Vegas.

Mason said United promised it would not raise premiums, deductibles or co-pays; reduce benefits; or cut physician payments because of the merger.

Sierra Vice President of Public and Investor Relations Peter O'Neill said the merger would not form a monopoly because there would still be a wide variety of health insurance options. "Those opposed to the deal look at the HMO market as one pie. We look at the HMO market as a piece of the pie."

A Justice Dept. spokesperson declined to state when the approval decision would be made. The department cannot comment about ongoing investigations, the spokesperson said.

United already has received approvals from the state insurance agencies of Arizona, California and Nevada for the $2.6 billion merger. But the Nevada Attorney General's Office is deciding whether it should mount a legal challenge to the merger. Attorney general spokeswoman Nicole Moon said a decision would not be made until the end of 2007.

The House Small Business Committee called the hearing to examine the impact of health insurer consolidation on small businesses. Medical society witnesses discussed the global impact of the trend.

Dr. Plested said health care has not become more efficient or affordable despite more than 400 insurance company mergers in the last 10 years. The dominance of health insurance companies in many areas of the United States allow them to coerce physicians into unjust contracts and to raise premiums without losing market share, he said.

American Academy of Family Physicians President James D. King, MD, told the panel that the health insurer consolidation trend had produced a "profound imbalance." He told the committee of an Ohio physician who had to refer patients to a lab across town for tests instead of a lab in the same building after a health insurer changed its national laboratory arrangement.

In other words, the physician could have faced fines by simply referring patients across the hall instead of across town.