Firms pulling Washington’s power levers on Capitol Hill.
The CEOs of Aetna and Anthem, the two big insurers that have offered to pay more than $90 billion to buy two competitors, Humana and Cigna, will testify before a Senate panel Tuesday, in an effort to persuade lawmakers that the deals will be good for consumers. Physician and hospital trade groups and health care advocates are among those that disagree,
Appearing before a Senate Judiciary committee that oversees antitrust issues will be Aetna CEO Mark Bertolini and Anthem CEO Joseph Swedish. The two men undoubtedly will try to make the case that, even though Aetna and Anthem would increase their presence in many markets across the country if regulators approve the acquisitions, there will be little need to sell any of their health plans to pass regulatory muster.
During a House Judiciary subcommittee hearing earlier this month, the American Medical Association said the two mergers would exceed antitrust guidelines in 97 metropolitan areas in 17 states and create a much less competitive marketplace in lots of other markets.
Executives of the firms involved in the proposed deals have insisted that consumers will benefit in the form of lower premiums, despite historical evidence that insurance industry mergers have actually resulted in just the opposite: higher premiums. While it’s true the companies that emerged from previous acquisitions were able to force doctors and hospitals to accept lower reimbursement, the insurers pocketed the savings instead of passing them along to their customers.
The AMA’s concern, of course, is that the same thing will happen if the Justice Department approves the Aetna-Humana and Anthem-Cigna deals and the health insurance marketplace becomes even more dominated by big for-profit insurers.
At the Sept. 10 House hearing, the AMA reminded lawmakers of a Justice Department guideline that a merger enhances corporate leverage “if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives.”
We can expect the Aetna and Anthem CEOs to dispute the AMA’s contentions, and we probably can expect the members of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights to ask mostly softball questions. That’s because the companies’ political action committees have been generous to several members of the subcommittee. According to the Center for Responsive Politics, the companies’ PACs have contributed several thousand dollars to the campaigns of all five Republicans on the subcommittee over the past five years, including subcommittee chair Mike Lee of Utah, and one of the four Democrats, Chris Coons of Connecticut. (Connecticut is home to Aetna and Cigna.)
The companies also spend large sums of money every year lobbying members of Congress. Aetna alone spent $3.5 million in internal and external lobbying expenses in both 2013 and 2014, according to its own disclosures and published reports. (It spent $5.5 million in 2010, the year Congress debated and finally approved the Affordable Care Act.)
There is good reason to expect that the company’s lobbying total will spike again this year. As POLITICO and Modern Healthcare, a trade magazine, have reported, Aetna has expanded its stable of lobbyists this year to include six K Street firms: Bloom Strategic Counsel, CGCN Group, The Gibson Group and West Front Strategies, Capitol Hill Consulting Group and Sidley Austin.
Those were strategic hires. Seth Bloom of Bloom Strategic Counsel, for example, is the former top lawyer for the Senate subcommittee that Aetna’s Bertolini will appear before this week. And Joseph Gibson of the Gibson Group previously served as the chief minority counsel to the House Judiciary Committee.
Something else we can expect: the two companies will get major league support from big business allies, including the U.S. Chamber of Commerce and the Business Roundtable. In a report detailing its political contributions for 2014, Aetna said it gave the Chamber $250,000 and the Business Roundtable $235,000 that year. Bertolini and Swedish are both on the Roundtable’s board of directors. And Aetna’s chief financial officer, Wayne DeVeydt, is on the Chamber’s board.
While Aetna has to disclose how much its PAC spends each year, it refuses to provide other information that some shareholders would like to see. Among those shareholders: Thomas DiNapoli, New York state’s comptroller, who’s responsible for the state’s $184.5 billion in pension assets, some of which are invested in Aetna stock. DiNapoli filed a shareholder proposal earlier this year asking the company to disclose the names of the tax-exempt groups it gave money to that were created specifically in support of certain political candidates. The proposal did not get enough support from other shareholders to pass, and it’s not likely Aetna will provide the information voluntarily.
An Aetna spokesman was quoted as saying that, “The overwhelming majority of our shareholders agree that additional disclosure is not warranted.”
Meanwhile, keep in mind that all the money Aetna and the other insurers are spending on lobbying is not just intended to influence Congress. The real lobbying focus will be on persuading Justice Department officials to approve the acquisitions.
Wendell is a senior analyst at The Center for Public Integrity where this first appeared on 9/2/2015.