In a recent article for the Columbus Dispatch, a spokesperson for the Ohio Department of Insurance (ODI) acknowledged that the health insurance mergers of Anthem-Cigna and Aetna-Humana were “currently under review by the department.” However, the spokesperson also told the Dispatch that ODI will not hold public hearings on the mergers. The ODI’s belief that they are not empowered or have the authority to hold hearings is simply incorrect.
The statute in question is Ohio Revised Code 3901.321. The Ohio statute is a version of the Insurance Holding Company System Regulatory Act, a model act passed by the National Association of Insurance Commissioners.
According to the statute, ODI not only has the power to hold public hearings on the mergers but is required to do so. The statute states that “the superintendent shall approve any merger or other acquisition described in division (B)(1) of this session unless, after a public hearing, the superintendent finds that any of the following apply.” One of the following conditions to be examined in a hearing is, “the effect of the merger or other acquisition of control would be substantially to lessen competition in insurance in this state or tend to create a monopoly.”
The language of the statute is quite clear. A hearing is necessary to determine if a health insurance merger would substantially lessen competition in the state. The exact same language is found in the Model Act passed by the NAIC. The purpose of this language was to ensure that the public could participate in merger hearings to raise issues of concern. Unlike Ohio, other states have interpreted the Model Act accordingly. For example, in Delaware, the state statute applies the same standard as the Model Act and Ohio: “The Commissioner shall approve any merger or other acquisition of control referred to in subsection (a) of this section unless, after a public hearing…” Using the same standard, Delaware recently announced that it would be holding a hearing scheduled for March 10, 2016.
Moreover Ohio is a state wherein the public would benefit from a hearing and analysis on competition. Anthem is already the largest health insurer in Ohio, and in 2014 the three largest commercial insurers for individual, small group, and large group markets enrolled 84% of all Ohioans. A combination of Anthem and Cigna would create an entity with almost 60% market share of the administrative-services-only (ASO) market, and a combination of Aetna and Humana would create an entity with 17.2% market share. Should these mergers proceed, Anthem and Aetna would control 80% of the Ohio ASO market.
The proposed merger would also impact Medicare Advantage (MA) markets. The combined Aetna-Humana company would possess 50% market share in MA throughout Ohio, and Anthem would have 23% market share. These mergers would increase concentration by 64% in Ohio’s MA markets, which greatly exceeds the thresholds for antitrust concern.
Public hearings through departments of insurance are an essential part of reviewing health insurance mergers. They provide transparency to the review process, allow third parties and individuals to air their concerns, and give both supporters and opponents of the mergers the chance to argue their cases. Given the potential harm to consumers and reduced competition that will result from these acquisitions, it is all the more important that ODI hold public hearings and give consumer groups the opportunity to testify.