Legal update: Health plan mergers

Friday, May 20, 2016 10:45 AM

Denver district court ruling partial victory

by John Conklin, Esq., Martin Conklin, PC

A Denver district court judge ruled in late April that the Form E filed by Aetna in the proposed Aetna-Humana merger is not a public document under Colorado law because Aetna is a foreign insurer, but that the Commissioner of the Division of Insurance has the discretion to release the Form E if it is in the public interest. 

The judge further ruled that any Form E filed by a domestic insurer, which includes both Anthem and Cigna, is a public document. The ruling came in a case filed by the Division of Insurance in response to a CMS request for the Aetna Form E under Colorado’s Open Records Act (CORA). Aetna joined the case and at a hearing held in court on April 21, before the judge’s ruling, Aetna’s attorney argued to the court in part that the Form E should be confidential because it contains “admissions” regarding the competitive impact the proposed merger will have in Colorado.

This is the precise reason CMS generated the CORA request. The Aetna attorney’s statement is also consistent with records obtained from a second CMS CORA request to DOI for all documents about the merger which show DOI concluded the merger violates the competitive standard contained in Colorado law for two lines of health insurance. Despite Aetna’s admissions in the Form E, DOI went on to approve the merger through inaction, ostensibly finding that one or both exceptions apply to permit the merger. The two permissible exceptions under Colorado law are that the proposed merger will not create a statewide monopoly or that it will not substantially lessen competition among health insurers in the lines violating the competitive standard. The problem with these exceptions is that they apply only statewide and do not account for the proposed merger’s impact on the local healthcare markets where providers practice and patients seek medical care.

Because the judge held that the Aetna Form E is not a public document, the part of the statute that addresses confidential information applies to it. That section vests discretion in the DOI Commissioner to release otherwise confidential information and documents after giving the carrier notice and an opportunity to be heard when the Commissioner determines that the interest of policyholders, shareholders or the public will be served by publication. CMS will be requesting that the Commissioner release the Aetna Form E under this section as clearly being in the public interest.

The judge also distinguished between Form E filings by domestic and foreign insurance carriers since the statute that applies to insurance company mergers contains separate, although overlapping and interacting, parts. The judge concluded that the legislature intended for there to be increased public scrutiny of mergers involving domestic insurance carriers compared to those involving only foreign insurance carriers.

This reasoning, even if a valid interpretation of the law, underscores another overarching problem with the law. Even as foreign insurers under Colorado law, Aetna and Humana are both among the top six health insurers in the state and do substantial business in certain health insurance lines and local markets. The competitive impact of this proposed merger involving two “foreign” insurance companies will be as significant and real on providers and patients in those markets as a merger involving “domestic” insurers.

Anthem has filed a preliminary notice with DOI of its intent to acquire Cigna, but neither company has yet filed a Form E. Filing a Form E is required under Colorado law. CMS has already initiated one CORA request to DOI regarding the proposed Anthem-Cigna merger and continues to monitor the agency for additional filings.

The judge’s recent ruling binds DOI to consider the Anthem Form E, when filed, as a public document. CMS has shared the Denver district court opinion with the AMA’s legal office for possible further use in the home states of Aetna and Humana, and with the Department of Justice that is continuing to review the proposed merger for its competitive impact on federal programs.