Kathleen Sebelius, Key Architect of Affordable Care Act, Raises Questions About Mergers

June 15, 2016

 

The Affordable Care Act (ACA) is designed to provide access to health care, to reduce premiums, and to bend the health care cost curve in order to benefit all Americans. However, its success will depend on free and fair competition in the health insurance markets, and the Anthem-Cigna and Aetna-Humana insurance mergers will greatly reduce this competition. Kathleen Sebelius, former Secretary of Health and Humana Services under President Obama and one of the key architects of the ACA, recently criticized the mergers in an interview, saying they would result in increased costs and less consumer choice.

 

Sebelius, who served as Kansas’s insurance commissioner and governor before she joined Obama’s cabinet, remarked that she was “concerned about the possibility that mergers of these companies will lead to less competition which in historic perspective means higher prices and fewer choices.” In the interview, she further stated that the number of major national insurance companies would go from five to three and result in a “dramatically different playing field” that “will impact every state, every population, just given the size of these mergers.” The ACA’s strategy for reducing health care costs and benefiting ordinary Americans relied heavily on competition, and it was intended to encourage more companies to enter health insurance markets and create a structure friendly to consumers. Sebelius noted that “competition actually is a great price lever” and it gives “not only more choices to consumers but typically better prices to consumers.” She also noted that by saying that she felt confident many people would closely scrutinize these mergers, including Connecticut Senator Richard Blumenthal.  

 

In 2002, Sebelius blocked Anthem’s attempted acquisition of Kansas Blue Cross Blue Shield. In a sharp statement, she proclaimed that the merger “would cost Kansas businesses, small employers and families millions of dollars.” When she ran for governor, she denounced Anthem and said its objectives would harm consumers, leaving them with reduced access to health care and less economic security. Her criticisms are still relevant today; in the past decade, Anthem has only grown larger and its behavior has not changed at all. If it gobbles up Cigna, it will be the largest health insurer in American history, with 53 million customers.

The two mergers are still being reviewed by state and federal antitrust authorities. If Anthem’s proposed acquisition of Cigna is approved, Cigna CEO David Cordani will receive $58.7 million. Moreover, if Aetna’s merger with Humana is approved, Aetna CEO Mark Bertolini stands to receive $131 million. At the same time that insurer CEOs will receive these golden parachutes, millions of Americans are struggling to pay rising premiums. Once again, the merging companies tell us that these deals will lead to reduced costs, but there is no evidence of any such benefits, and a good deal of evidence to suggest otherwise.

 

In many areas, health insurance markets already suffer from insufficient competition, and additional competitive losses will further harm consumers. Entry into the markets remains difficult, and if these mergers are approved, all of the progress made under the ACA could be undone. It is no surprise that Sebelius is so concerned about the mergers; one of her central accomplishments is threatened by the loss of competition that these deals will cause.

 

The Department of Justice, State Attorneys General, and State Insurance Commissioners should heed her words. As one of the chief designers of the ACA, she is better equipped than almost anyone else to state what its goals are, and how its benefits could be jeopardized.

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