Legal battle for transparency

Tuesday, March 01, 2016 12:14 PM

The fight for transparent review of insurance mergers

by John Conklin, Esq., Martin Conklin, PC

The proposed health insurer mergers shine a spotlight on the laws that require the Colorado Division of Insurance (DOI) to review such mergers.

The merger between Anthem and Cigna is governed by a law that applies to domestic insurers. The public has received notice of Anthem’s initial filing with DOI of preliminary materials and DOI will hold a public hearing and prepare and release several analytical reports on the merger. However, Aetna and Humana are both foreign insurers under Colorado law. Although Aetna provided DOI with notice of the proposed acquisition of Humana last summer, current law did not require DOI to provide notice to the public or stakeholders that it was reviewing the proposed deal. DOI disregarded requests for notice. After 30 days passed without action by DOI, the merger was considered approved under Colorado law, again without notice to or input from physicians, hospitals or consumers.

The Colorado Medical Society is taking action to determine why DOI approved the Aetna-Humana merger without public notice or input. Using Colorado’s Open Records Act (CORA), CMS demanded from DOI a copy of the pre-acquisition notice Form E that was filed with DOI by Aetna. Aetna’s Form E contains Colorado market-share information Aetna submitted regarding the proposed merger. In response to CMS’ CORA request, DOI filed a lawsuit in Denver district court asking a judge to determine whether Aetna’s Form E is confidential under Colorado law. Aetna has joined in that lawsuit and the court will issue a decision this spring. While CMS strongly believes the Form E is not confidential under the current law, if a judge disagrees and finds that Aetna’s Form E is confidential, then DOI’s approval of the merger will have occurred without public awareness that the merger was even under DOI review and without public access to the data Aetna submitted to DOI to gain approval for the merger.

The significance of the Form E data has been made clear through a second, broader Open Records Act request from CMS to DOI, which elicited documents that show DOI concluded – based on the data Aetna submitted – that the proposed Aetna-Humana merger violates the statewide competitive standard in two lines of health insurance: Medicare and other health insurance. Once a violation is found, DOI must then determine whether an exclusion applies, which would allow DOI to approve the merger.

For the Aetna-Humana merger, DOI concluded that an exclusion applies because the merger will not create a statewide monopoly or substantially lessen statewide competition among health insurers in those insurance lines. The data and analysis for that conclusion is contained in the Aetna Form E that CMS is seeking in court from DOI. Data from other sources supports a conclusion that the merger will impact competition in certain Colorado markets.

If successful in obtaining the document, CMS will be able to have it reviewed under the competitive standard by an expert, and also share it with the Department of Justice, which is conducting an investigation of the proposed Aetna-Humana merger under federal law.

A serious flaw revealed by the Aetna-Humana merger is that the competitive standard used to initially determine whether a merger or acquisition is potentially harmful to the Colorado health insurance market only looks at the statewide impact. But physicians, hospitals and patients all operate in local geographic markets. The Aetna-Humana merger approved by DOI will almost certainly have substantial competitive market impact on patients, physicians and hospitals in some local geographic markets. Unfortunately, nothing in the current law specifically requires DOI to look at the proposed merger’s impact on local geographic health insurance markets.

A solution to this flawed standard is to change Colorado law to require DOI to conduct an investigation and hold a public hearing whenever a merger or acquisition involving a foreign insurer shows violation of the competitive standard for any insurance line, so that further input and analysis on a statewide and local level may then occur. The process would gain both transparency and input from affected parties. DOI could also make a more informed decision, and better fulfill its obligation to maintain a healthy, competitive health insurance marketplace for consumers, physicians, hospitals and others.