Our New Godzilla: Health Insurance Consolidation

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Insurance Company Consolidation

Gorillia. Photo by Guillermo Fdez/Flickr

Update July 24, 2015: Anthem agrees to acquire Cigna for $54 billion, still holding the #2 position—for now. The big three: UnitedHealth, Anthem (Cigna) and Aetna (Humana).

Update July 3, 2015: Aetna agrees to acquire Humana for $37 billion. This puts Aetna in the #3 position behind UnitedHealth and Anthem.

There are five major medical insurers in America and soon there may be only three. What does this health insurance consolidation mean for the future of healthcare?

Clearly, the sacred and confidential nature of the relationship between doctor and patient is history. Big Money has moved in to stay. The medical insurance 500 pound gorilla is about to consolidate into an even more intrusive and dense trust which—as with the banks—will be too big to fail and far too big to control.

Santa Fe, New Mexico, 02 July 2015
by TAMMM Staff

A Trust You Can’t Trust

Few know that during the debate over the Affordable (Unaffordable) Care Act, there were eight lobbyists for each member of Congress to influence health reform bills in 2009. Prominently, UnitedHealth Group hired former Senate Majority Leader, Tom Daschle (D-SD) who turned lobbyist, to spearhead the effort to get Obama’s legacy through into law. Daschle, who rakes in well over $2.1 million a year, was nominated by Obama to be HHS Secretary, but withdraw his candidacy after a variety of IRS and other ethics scandals were exposed.

President Teddy Roosevelt, known as the Trust Buster, had broken up monster-like trusts that jacked up rates and exploited consumers in the steel, coal and railroads industries, knowing full well that the consolidation of such powerful interests could fix and manipulate pricing.

In 1961 on the eve of JFK’s Inauguration, President Dwight D. Eisenhower warned the country about the looming threat of the Military-Industrial Complex. We now know that Eisenhower had also intended to insert the word Congressional into his missive: The Military-Industrial-Congressional Complex. His party advisors coaxed Ike into removing the word Congressional from his televised speech to the nation not wanting to taint the perception that Congress was anything but Lilly White.

The power of the lobby and today’s Super PACs have pretty much made the government into a handmaiden to big business. Hence, we now have the best laws that money can buy!

We do not underestimate the complexity of the problem for building a healthcare system. It is well known that we spend more per capita on our healthcare than all the rest of the world combined, yet our patient outcomes continue to decline.

Follow the Money!

So, the money is there and lots of it, but where is it going? Patients are paying more for premiums and deductibles, doctors are being reimbursed less and fleeing medicine resulting in a nationwide shortage of doctors as compared to the surplus of doctors we enjoyed in the 1980s.

The medical insurance players have never been more profitable, often resisting payment for medical treatment and incentivizing their executives to deny claims which they systematically contest.

This is what a trust does when it has power, when it “owns” government—and when it is not policed. Cozy relationships and behind-the-door deals have placed the interests of patients and physicians last and the interests of protecting the enormous money flow first!

There are now only a handful of major banks left in the US. They continue to be given billions per month under the condition that they lend these funds to stimulate the economy. Instead, these “too big to fail” behemoths have become surly and left alone as they have shifted their emphasis of banking and lending to a variety of other businesses which are not in the interest of our society.

The Glass-Steagall Act of 1933, which intended to rein in the banks in the wake of the Great Depression, was repealed in 1999 by the Clinton Administration at the behest of the big banks. This is when the unshackled banks had a hay-day leading up to the 2008 major global financial crisis and the recession from which, we contend, we still have not recovered. The government stood by and instead of punishing the banks for their greed, they were enriched even more.

What does this have to do with healthcare? The context in which the calculus of our society and economy work must be understood in order that we can better understand how the giant healthcare industry is now operating. Patients anyone?

Remember that these billions of dollars, coupled with a global recession and the US-led trillion dollar wars, have left the US in the deepest debt of all time coupled with lingering unemployment and the loss of world trust and respect.

Manifest Destiny?

The Chinese-led program to establish the Asian Infrastructure Investment Bank (AIIB), backed by gold vs. paper, is a prelude to removing the US dollar from being the world’s reference currency. The United Kingdom, Germany, Switzerland, Russia and India are all founding members participating with the Chinese in its formation, with the US absent from the signing treaty.

We have eaten ourselves alive with a demonstrated lack of government and leadership. The American people have been transfixed by entertaining political jargon and limited access to information through our media, which, has also consolidated into a handful of companies with self-serving agendas.

It’s no wonder the major grab of power by the medical insurance cartel is here. Essentially, they are already a Trust, but with governmental complicity they are now becoming more dense and even more dangerous and rich!

They have good reason to be happy. They have bought the best law that money can buy—at the expense of us all. The precedent for doing so is well established in nearly every other sector of US industry, and we have the honor of picking up the tab.

The price we are paying is the dooming of our Democracy.

Wake Up and Smell the Coffee, Please!

There are five major health insurers in America and soon there may be only three. What does this health insurance consolidation mean for the future of healthcare? According to Tom Miller, resident fellow of the American Enterprise Institute (AEI), “If you want to control people it’s better to control fewer of them.”

Yes, that’s what Miller stated during the Politico Pro Health Care Briefing panel discussion on the aftermath of the SCOTUS decision in the King v. Burwell. Miller is also a former senior health economist for the Joint Economic Committee (JEC) in Congress, a trial attorney, journalist, and sports broadcaster who co-authored the bestselling book, “Why ObamaCare Is Wrong For America.”

A June 22, 2015 article on CNN Money, “Will you pay more health insurance as companies merge?” gives a snapshot of the big five and their plans.

These are your top five, ranked by their 2014 net revenues:
  1. UnitedHealth Group
    1. $130.5B net revenues 2014
    2. $123.38 stock price July 1, 2015
  2. Anthem (Wellpoint/Blue Cross/Blue Shield)
    1. $74B net revenues 2014
    2. $165.22, stock price July 1, 2015
  3. Aetna
    1. $58B net revenues 2014
    2. $128.90 stock price July 1, 2015
  4. Humana
    1. $48.5B net revenues 2014
    2. $193.14 stock price July 1, 2015
  5. Cigna
    1. $35B net revenues 2014
    2. $162.04 stock price July 1, 2015

Even though Cigna has rejected the offer so far, Anthem has made an offer to buy Cigna for $184 per share, as disclosed to Anthem shareholders on June 20. The combined new company would be a clear industry leader, serving 53 medical members across the commercial and government segments and generating more than $115 billion in annual revenues based on the most recent 2015 outlook publicly reported by both companies.

In what’s being called “Merger Madness” Aetna and Humana are said to be in talks too, with Aetna making a bid for the #4 insurer. And there have been rumors that UnitedHealth may be interested in Aetna… which might leave Humana out of picture, so we wouldn’t be surprised if they are eager to make a deal soon since it’s been missing their big profit projection targets this last year.

There are already cries of trust violations and the American Academy of Family Physicians (AAFP) has already reached out to the Federal Trade Commission to express concerns. That means that doctors are worried that these mega-mergers will leave patients higher and drier than they already are.

AAFP’s Chair, Edith Ramirez, wrote to the Federal Trade Commission complaining that “mergers in the health insurance industry would have an immediate and profound negative impact on the availability and affordability of health insurance for millions of consumers.”

As if they didn’t already wield enough, if we find ourselves beholden to two or three giant insurance companies, they will have much more power. Get ready for higher premiums and fewer doctors and hospitals that are part of network coverage plans.

“Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians,” Ramirez wrote on behalf of her members. “More often than not, consolidation increases costs and reduces options for consumers.”

Enter the King Gorilla

Vishnu Lekraj, an analyst with Morningstar, predicts that UnitedHealth—which he called the “gold standard” of the industry, will not be snapping anyone up just yet. He does believe Anthem will buy either Aetna or Humana, and especially if Cigna continues to balk at Anthem’s offer. If he’s right, what then? “The two companies left standing will then merge,” he said.

Why are these talks ramping up now? Lekraj thinks the big boys are scrambling to announce mergers ASAP so they can emerge as fused before Obamacare’s next open enrollment period which starts in November.

Miller says critics of Obamacare haven’t lost yet. We hope he’s right when he advises, “The lesson is not to choose between handwringing and empty gestures. There is real work to be done, and it needs a more persistent, longer-term perspective.”

But chances are, we’ll keep shaking our heads as the next trust to rule takes its giant paws and grips tightly to the American medical money machine.