[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]






                          HEALTHY COMPETITION?
                     AN EXAMINATION OF THE PROPOSED
                    HEALTH INSURANCE MERGERS AND THE
                    CONSEQUENT IMPACT ON COMPETITION

=======================================================================

                                HEARING

                               BEFORE THE

                            SUBCOMMITTEE ON
                           REGULATORY REFORM,
                      COMMERCIAL AND ANTITRUST LAW

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 29, 2015

                               __________

                           Serial No. 114-47

                               __________

         Printed for the use of the Committee on the Judiciary

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



      Available via the World Wide Web: http://judiciary.house.gov
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                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR S. SMITH, Texas                ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia            HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa                       Georgia
TRENT FRANKS, Arizona                PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas                 JUDY CHU, California
JIM JORDAN, Ohio                     TED DEUTCH, Florida
TED POE, Texas                       LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah                 KAREN BASS, California
TOM MARINO, Pennsylvania             CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina           SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho                 HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas              DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia                SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan

           Shelley Husband, Chief of Staff & General Counsel
        Perry Apelbaum, Minority Staff Director & Chief Counsel
                                 ------                                

    Subcommittee on Regulatory Reform, Commercial and Antitrust Law

                   TOM MARINO, Pennsylvania, Chairman

                 BLAKE FARENTHOLD, Texas, Vice-Chairman

DARRELL E. ISSA, California          HENRY C. ``HANK'' JOHNSON, Jr.,
DOUG COLLINS, Georgia                  Georgia
MIMI WALTERS, California             SUZAN DelBENE, Washington
JOHN RATCLIFFE, Texas                HAKEEM JEFFRIES, New York
DAVE TROTT, Michigan                 DAVID N. CICILLINE, Rhode Island
MIKE BISHOP, Michigan                SCOTT PETERS, California

                      Daniel Flores, Chief Counsel
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                            C O N T E N T S

                              ----------                              

                           SEPTEMBER 29, 2015

                                                                   Page

                           OPENING STATEMENTS

The Honorable Tom Marino, a Representative in Congress from the 
  State of Pennsylvania, and Chairman, Subcommittee on Regulatory 
  Reform, Commercial and Antitrust Law...........................     1

The Honorable Henry C. ``Hank'' Johnson, Jr., a Representative in 
  Congress from the State of Georgia, and Ranking Member, 
  Subcommittee on Regulatory Reform, Commercial and Antitrust Law     2

The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................     3

The Honorable Bob Goodlatte, a Representative in Congress from 
  the State of Virginia, and Chairman, Committee on the Judiciary    22

                               WITNESSES

Mark T. Bertolini, Chairman and Chief Executive Officer, Aetna, 
  Inc.
  Oral Testimony.................................................    24
  Prepared Statement.............................................    27

Joseph Swedish, President and CEO, Anthem, Inc.
  Oral Testimony.................................................    38
  Prepared Statement.............................................    40

Tom Nickels, Executive Vice President, American Hospital 
  Association (AHA)
  Oral Testimony.................................................    54
  Prepared Statement.............................................    56

Andrew W. Gurman, M.D., President-Elect, American Medical 
  Association
  Oral Testimony.................................................    75
  Prepared Statement.............................................    77

Jaime S. King, Professor of Law, University of California, 
  Hastings College of Law
  Oral Testimony.................................................   114
  Prepared Statement.............................................   116

Edmund F. Haislmaier, Senior Research Fellow of Health Policy 
  Studies, The Heritage Foundation
  Oral Testimony.................................................   131
  Prepared Statement.............................................   133

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Henry C. ``Hank'' Johnson, 
  Jr., a Representative in Congress from the State of Georgia, 
  and Ranking Member, Subcommittee on Regulatory Reform, 
  Commercial and Antitrust Law...................................     6

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from Mark T. Bertolini, 
  Chairman and Chief Executive Officer, Aetna, Inc...............   156

Response to Questions for the Record from Joseph Swedish, 
  President and CEO, Anthem, Inc.................................   159

Response to Questions for the Record from Tom Nickels, Executive 
  Vice President, American Hospital Association (AHA)............   164

Response to Questions for the Record from Edmund F. Haislmaier, 
  Senior Research Fellow of Health Policy Studies, The Heritage 
  Foundation.....................................................   167


 
 HEALTHY COMPETITION? AN EXAMINATION OF THE PROPOSED HEALTH INSURANCE 
            MERGERS AND THE CONSEQUENT IMPACT ON COMPETITION

                              ----------                              


                      TUESDAY, SEPTEMBER 29, 2015

                       House of Representatives,

                  Subcommittee on Regulatory Reform, 
                      Commercial and Antitrust Law

                      Committee on the Judiciary,

                            Washington, DC.

    The Subcommittee met, pursuant to call, at 2:09 p.m., in 
room 2141, Rayburn Office Building, the Honorable Thomas Marino 
(Chairman of the Subcommittee) presiding.
    Present: Representatives Marino, Goodlatte, Collins, 
Waters, Ratcliffe, Bishop, Johnson, Conyers, DelBene, Jeffries, 
Cicilline, and Peters.
    Staff Present: (Majority) Anthony Grossi, Counsel; Andrea 
Lindsey, Clerk; and (Minority) Slade Bond, Counsel.
    Mr. Marino. The Subcommittee on Regulatory Reform, 
Commercial and Antitrust Law will come to order. Good 
afternoon, everyone.
    Without objection, the Chair is authorized to declare 
recesses of the Committee at any time. We welcome everyone to 
today's hearing, and I now recognize myself for an opening 
statement.
    We are here today to examine the proposed mergers between 
the health insurance companies Aetna and Humana, and Anthem and 
Cigna. Collectively, they currently provide health insurance 
products to over 85 million Americans, and they are among the 
largest health insurance companies in the country.
    Undoubtedly, it should be determined whether these 
transactions have the potential to significantly alter the 
competitive landscape of the health insurance industry. In 
examining this industry, it is important to note that the 
health insurance market includes a number of different 
products. There are insurance products for individuals and 
families that can be purchased directly from the marketplace, 
insurance that companies purchase to offer to their employees, 
and government-funded insurance that private companies help to 
administer.
    These insurance products are often local in nature, since 
patients generally visit the doctors and hospitals near where 
they work and live. However, these products are often provided 
by insurers with a strong national or regional presence.
    Aetna, Humana, Anthem, and Cigna essentially all offer the 
same variety of health insurance products. However, each 
company has a particular business line that they emphasize or 
specific geographic markets in which they operate.
    Aetna is a significant provider of commercial health 
insurance, Humana places a strong emphasis on its Medicare 
Advantage products, and Anthem and Cigna largely operate in 
different geographical regions.
    Following the announcements of the proposed mergers, 
several commentators issued statements raising concerns about 
the two transactions. Associations representing hospitals and 
doctors are among that group, and they are urging the 
Department of Justice to review thoroughly the proposed deals. 
They appear before us today to express those views and provide 
additional detail regarding their concerns.
    We are not here today to issue any definitive judgments 
about whether DOJ should take any particular actions regarding 
these mergers. Instead, the hearing serves as a public and 
transparent platform from which we will hear from those who 
believe the deal will benefit consumers, and those who believe 
the merger may negatively impact competition within the health 
insurance marketplace.
    I look forward to today's discussions, and I yield back the 
balance of my time.
    The Chair now recognizes the Ranking Member of the 
Subcommittee on Regulatory Reform, Commercial and Antitrust 
Law, Congressman Johnson from the State of Georgia, for his 
opening statement.
    Congressman?
    Mr. Johnson. Thank you, Mr. Chairman, for holding this very 
important hearing.
    Today's hearing is an important opportunity to consider the 
effects of Anthem's proposed acquisition of Cigna, and Aetna's 
proposed acquisition of Humana, on consumers' access to health 
insurance coverage that is both affordable and effective. I 
have long supported vigorous enforcement and promotion of 
competition in the health care industry for both providers and 
insurers. However, as George Slover, Consumers Union's senior 
policy counsel, noted in his testimony before the Senate 
Judiciary Subcommittee on Antitrust and Consumer Protection 
last week, over a century of experiences demonstrate that ``you 
cannot run the health care system on competition alone and just 
allow the free market to go where it will.''
    Enactment of the Affordable Care Act was recognition that 
competition alone did not ensure accountability in the health 
care marketplace, greater savings to consumers, or equal 
treatment of consumers by insurance providers. Smart health 
care regulation was critical to keeping premiums down, to 
ending discrimination against Americans with pre-existing 
conditions, and to ensuring the common good for millions of 
consumers. After all, what good is having numerous options for 
health insurance providers, if none will provide coverage for 
treating your child's condition?
    It is also clear that the Affordable Care Act both depends 
on and promotes competition in the health care marketplace, as 
Professor Tim Greaney noted in our recent hearing on 
competition in the health care marketplace. Professor Leemore 
Dafny, a leading health care economist, has also testified that 
the smart regulation inherent to the Affordable Care Act 
promotes competition in the insurance industry through a number 
of mechanisms, including product standardization and plan 
certification, which reduced the hurdle to entry posed by the 
need to establish a credible reputation, and via health 
insurance marketplaces, which reduce marketing and sales costs, 
thereby raising the likelihood of entry.
    The health insurance marketplaces were explicitly designed 
to facilitate competition among insurers. We also know that 
since the first open enrollment period began in October 2013 
for consumer exchanges, millions of Americans who were 
previously uninsured now have access to affordable care. The 
Affordable Care Act has already expanded coverage, savings, and 
protections for millions of American consumers while promoting 
new competition.
    The Department of Health and Human Services reported in 
July that the law had slowed the growth of health care premium 
costs as new competitors enter local markets and price 
competitions intensify. This report on competition in health 
insurance marketplaces also indicates that competition has 
intensified across the country, as the number of health 
insurance issuers have increased in the most counties since 
implementing the Affordable Care Act. Not only has this 
increased competition arrested the growth of health care 
premiums, the influx of new plans in local markets increases 
the pressure on incumbent insurance issuers to moderate the 
costs of premiums.
    It is critical that we ensure that the number of new 
competitors in every market continues to grow, to drive down 
costs, and ensure that health care markets are delivering the 
best and most health care choices in every county and for every 
health care product in America.
    I look forward to learning how the proposed transactions 
will achieve these vital policy objectives. With that, I yield 
back.
    Mr. Marino. Thank you.
    The Chair now recognizes the full Judiciary Committee 
Ranking Member, Mr. Conyers of Michigan, for his opening 
statement.
    Congressman?
    Mr. Conyers. Thank you, Mr. Chairman.
    I want to welcome the witnesses, numerous but necessary for 
this important hearing, and I also welcome those concerned 
enough to attend this hearing about to take place.
    We are talking about what we do with the second largest 
health insurance company and the fourth largest health 
insurance company, the third largest and the fifth largest. If 
consummated, these mergers will result in the number of large 
national health insurance companies going from five to three, 
leaving just UnitedHealthcare, Anthem, and Aetna.
    Proponents of these mergers make a number of arguments in 
their favor, centering on the potential for efficiencies and 
enhanced consumer services these mergers are said to offer. 
Moreover, they contend that the lack of overlap between the 
merging firms in most geographic markets means that there 
should be little risk to competition in allowing these mergers 
to proceed.
    As we hear from the heads of the two acquiring firms as to 
why these mergers benefit competition and consumer welfare, 
however, we should keep in mind a few considerations. Begin 
with the two proposed mergers coming at a time when the health 
insurance markets seem to be already heavily concentrated. 
According to the 2015 study of competition in health insurance 
markets conducted by the American Medical Association, health 
insurance markets in seven out of 10 metropolitan statistical 
areas are already highly concentrated. In almost 40 percent of 
the metropolitan areas studied, one health insurer controls 
more than 50 percent of the market, as was the case in 14 
States.
    Moreover, according to the study by the Commonwealth Fund 
published last month, 97 percent of markets for Medicare 
Advantage, a program through which private insurers provide 
some Medicare benefit, are highly concentrated.
    Prior instances of consolidation among health insurers led 
to increased premiums for consumers. In fact, there is no 
evidence that past health insurance mergers produced any 
savings that were passed on to consumers.
    In addition, lack of competition among health insurers 
could diminish the quality of care that patients currently 
receive. In light of this broad concern about further 
consolidation in an already heavily concentrated industry, we 
have a duty to carefully examine some specific concerns that 
have been raised about these two proposed acquisitions.
    For example, consumer groups fear that the Aetna-Humana 
transaction may result in a lessening of competition in 
Medicare Advantage markets. The combined Aetna-Humana would 
become the largest Medicare Advantage insurer with overlaps in 
a large number of geographic markets. Moreover, merger critics 
assert that neither traditional Medicare nor health plans 
offered by providers are meaningful substitutes for Medicare 
Advantage plans, meaning that the potential for competitive 
harm in Medicare Advantage markets is great.
    Now with respect to the Anthem-Cigna merger, the American 
Hospital Association in particular notes that Anthem's 
affiliation with the Blue Cross and Blue Shield system may 
raise competitive concerns, in the event the merger is 
consummated. The association asserts that the merger could 
further entrench the already dominant position that many Blue 
Cross Blue Shield plans have in many States.
    Also, there may be a national market for health insurance 
for large employers. Reducing the number of national 
competitors from five to three would undermine competition in 
that market.
    Finally, we must address the issue of whether divestitures 
are a sufficient remedy for the anticompetitive effects of 
these mergers. Because of the high barriers to entry into the 
health insurance business, critics contend, competition is 
unlikely to be restored once lost through consolidation.
    So I hope that all of our distinguished witnesses will take 
this opportunity to address these and other concerns they may 
have. Accordingly, I look forward eagerly to their testimony 
and thank them for appearing today.
    Thank you, Mr. Chairman.
    Mr. Marino. Thank you.
    Mr. Johnson. Mr. Chairman, I would ask that a letter from 
U.S. PIRG and a statement from Consumers Union be entered into 
the record, without objection.
    Mr. Marino. So granted.
    [The information referred to follows:]
   
   
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                               __________
    Mr. Johnson. Thank you.
    Mr. Marino. The Chair now recognizes the Chairman of the 
full Judiciary Committee, Mr. Bob Goodlatte of Virginia, for 
his opening statement.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Chairman, this past July, Aetna announced its intent to 
merge with Humana, and Anthem similarly proposed to merge with 
Cigna. These firms represent four of the five largest for-
profit health insurance companies in the country.
    Currently, the Department of Justice is reviewing the 
deals. Its review will involve a detailed, fact-specific 
analysis that will likely take more than a year to complete. 
Unless the Department of Justice seeks to enjoin one or both of 
the transactions, nearly the entire antitrust review process 
will take place outside the public view.
    In contrast, today we have before us the two CEOs of the 
acquiring companies who will state their cases for the mergers. 
They sit at the same table as some of the most vocal critics of 
the deals, and each will have an opportunity to respond to our 
questions about their views and the impacts of the prospective 
transactions. Through this record, the public will better 
understand the asserted merits and concerns regarding the 
proposed mergers. Furthermore, the record created today will 
assist the Committee in administering its oversight of the 
antitrust enforcement agencies.
    Lurking behind the antitrust review of these deals is the 
question of how much influence Obamacare had on the proposed 
transactions. This issue is of keen interest to the Committee 
and we have conducted several hearings on the broader issue of 
Obamacare and its impacts on consolidation and competition in 
the health care industry.
    Certainly, the Affordable Care Act has had a profound 
effect on the health insurance industry. The law greatly 
diminished the flexibility of insurance companies to manage the 
risks of insuring patients. Coupled with these rigid parameters 
are requirements on how insurance companies can allocate funds 
for medical claims and other expenses. In many respects, health 
insurance under the Affordable Care Act resembles more of a 
commodity than the nuanced and diverse product base that 
existed prior to the law's enactment.
    Many commentators speculated that these constraints, 
together with the significant regulatory burden placed on 
insurers, would cause greater consolidation in the industry. 
The Affordable Care Act put into place incentives for insurers 
to increase in size so they can better manage costs and the 
heavy regulatory burden and operational constraints imposed by 
the law.
    Indeed, at our most recent hearing focused on consolidation 
in the health care industry, we heard testimony that insurers 
are leaving the market, insurance policy coverage is narrowing, 
and consumers are ending up paying more for less. These are 
hardly the results that Obamacare proponents promised.
    In addition to learning about the specifics of the proposed 
mergers and the concerns raised by critics of the deals, I look 
forward to hearing about the role the Affordable Care Act 
played in these mergers and in the insurance market generally.
    Thank you, Mr. Chairman, for continuing the Committee's 
series of hearings on competition in the health care industry. 
I look forward to today's discussion on the pending health 
insurance mergers, and I yield back.
    Mr. Marino. Thank you, Chairman.
    Without objection, other Members' opening statements will 
be made part of the record.
    I will begin by swearing in our witnesses before 
introducing them.
    Would you please stand and raise your right hand?
    Do you swear or affirm that the testimony you are about to 
give before this Committee is the truth, the whole truth, and 
nothing but the truth, so help you God?
    Let the record reflect that the witnesses have responded in 
the affirmative.
    Please be seated, and thank you.
    I am now going to introduce all the witnesses. I will go 
through each of your bios, and then we will get back to your 
opening statements. If I mispronounce your name, please correct 
me.
    I think I can get this one right. Mr. Bertolini is the 
chairman and chief executive officer of Aetna. Mr. Bertolini 
joined Aetna in 2003 and served as the company's president from 
2007 until 2014. Prior to joining Aetna, Mr. Bertolini held 
executive positions at Cigna, and NYLCare Health Plans, and 
SelectCare, Inc. He earned his undergraduate degree in business 
administration and finance from Wayne State University and an 
MBA in finance from Cornell University.
    Welcome, sir.
    Mr. Swedish is the president and chief executive officer of 
Anthem. Mr. Swedish has served for more than 40 years in 
leadership positions within the health care industry, including 
25 years as a CEO for major health systems. Mr. Swedish earned 
his bachelor's degree from the University of North Carolina at 
Charlotte and his master's degree in health administration from 
Duke University.
    Welcome, sir.
    Mr. Nickels recently became the executive vice president of 
government relations and public policy at the American Hospital 
Association (AHA). He has been with the AHA for over 21 years, 
recently serving as the association's senior vice president for 
Federal relations. Mr. Nickels earned his bachelor's degree in 
English and philosophy from Dickinson College and his J.D. from 
New York University School of Law.
    Welcome, sir.
    Dr. Gurman is the president-elect of the American Medical 
Association. He is an orthopedic hand surgeon from Altoona, 
Pennsylvania.
    Welcome, sir, from one Pennsylvanian to another.
    Previously, he served as speaker and vice speaker of the 
AMA House of Delegates for 8 years. Dr. Gurman earned his 
bachelor's degree from Syracuse University and his medical 
degree from the State University of New York.
    Professor King is a professor of law and the associate dean 
and co director of the University of California, San Francisco, 
and the University of California, Hastings Consortium of 
Science, Law and Health Policy. Professor King's work has been 
published in numerous scholarly journals, including the UCLA 
Law Review, the Yale Journal of Health Policy, Law and Ethics, 
and the American Journal of Law and Medicine, among others. 
Professor King received her bachelor's degree, cum laude, from 
Dartmouth, her J.D., cum laude, and Order of the Coif, from 
Emory University, and her Ph.D. in health policy from Harvard 
University.
    Welcome.
    Mr. Haislmaier is a senior research fellow of health policy 
studies at the Heritage Foundation. He is widely considered an 
expert on health care policy, an industry he has been studying 
since 1987, and frequently testifies between State and Federal 
legislative committees. Mr. Haislmaier earned his bachelor's 
degree in history from St. Mary's College in Maryland.
    Welcome.
    Each of the witnesses' written statements will be entered 
into the record in its entirety. I ask that each witness 
summarize his or her testimony in 5 minutes or less. To help 
you with that, there is a timing light in front of you, and the 
light will switch from green to yellow, indicating that you 
have 1 minute to conclude your testimony. When the light turns 
red, it indicates that your 5 minutes have expired. As I do 
this just customarily, because I know you are concentrating on 
giving your statement, I will politely, nonchalantly, raise the 
gavel, to give you a little indication to please wrap up, 
before slamming it down.
    Mr. Bertolini, please?

         TESTIMONY OF MARK T. BERTOLINI, CHAIRMAN AND 
              CHIEF EXECUTIVE OFFICER, AETNA, INC.

    Mr. Bertolini. Good afternoon, Chairman Marino, Ranking 
Member Johnson, other Members of the Committee. Thank you for 
inviting me here today to talk about Aetna's proposed 
acquisition of Humana. My name is Mark Bertolini. I am chairman 
and CEO of Aetna.
    There is no doubt that health care is under dramatic change 
at this time, and I think that change is good and long overdue. 
Health care costs are unaffordable and we are now beginning to 
focus on how we improve quality of care to reduce redundancy, 
waste, and improve the overall affordability of care.
    To that end, the Aetna acquisition of Humana is about two 
companies coming together to offer a large number of consumers 
a broader and higher quality array of more affordable products. 
After the acquisition, Aetna will have a product portfolio 
balanced more evenly between commercial and government 
products, such as Medicare and Medicaid.
    Today, the market competes on price and choice of doctor. 
This will not change. But to win in the market, we believe 
consumers should also be able to pick products that are focused 
on improving the health of the member.
    The CDC has a term called Healthy Days. It is a simple 
survey that an individual takes to determine if they are having 
a healthy day. Both companies see this as an important metric. 
We both are committed to offering products and services that 
will help our members improve the number of healthy days they 
enjoy each year.
    I would like to address the competition and choice issues 
directly. First, it is important to point out that of the 54 
million beneficiaries in Medicare today, 37 million, or 68 
percent, receive their care through Medicare fee-for-service, 
while the remaining 17 million, or one-third, receive their 
care through Medicare Advantage, M.A., the private Medicare 
option delivered through health plans.
    Post acquisition, we believe that robust choice and 
competition will remain in the Medicare market. After the 
transaction, which is largely about Medicare and very little 
about commercial, only 8 percent of Medicare beneficiaries will 
receive their health benefits from Humana or Aetna, meaning 
that 92 percent of all beneficiaries will receive their health 
benefits from either Medicare fee-for-service or other M.A. 
plans.
    There are 143 health care companies offering M.A. plans 
with new entrants coming into M.A. Twenty-eight new health 
plans have joined in the last 3 years, of which 15 are owned by 
hospital systems.
    All health care is local, and today, M.A. is available in 
3,100 of the 3,200 counties across the country. Beneficiaries 
have an average of 18 M.A. private health plan options from 
which to choose. And even in nonmetro or rural areas, there is 
an average of 10 plan options to choose from.
    On the commercial side of the market, Humana represents 
less than 2 percent of the market and has no national employer 
market presence--zero. Today, Aetna represents under 12 percent 
of the commercial market. Nationally, there are 400 insurance 
companies operating in the commercial market, with the Blue 
Cross Blue Shield plan being the largest insurer in more than 
30 States.
    After the transactions, other companies will have 87 
percent of the commercial enrollment. On public exchanges, 
Aetna and Humana overlap in only eight States. In those States, 
there are an average of 10 other competing insurers, so we 
believe there will be no material change to the competitiveness 
of the commercial health insurance market as a result of our 
transaction.
    In regard to the price of our products, premium prices are 
driven by the underlying cost of care, such as hospitals, 
doctors, and prescription drug costs, which make up nearly 85 
percent of premium prices. They are not derived in the 
abstract.
    Given that this transaction is largely about M.A. prices, 
protection is even more assured because the government 
establishes M.A. rates based on the cost of health care in each 
county. Insurance companies offering M.A. plans must bid 
against the government benchmark as set forth in each county 
and are incentivized to be competitive. Hence, many companies 
offer zero dollar premium plans to consumers. In fact, M.A. 
premiums have decreased by 10 percent since 2010.
    Certain medical societies have opposed our deal out of 
concern that it will affect the income of doctors. We believe 
that there will be no material effect on revenue for doctors as 
a result of the acquisition. However, we are committed to 
payment reform and believe the system must move from a fee-for-
service model to a value-based model payment. We are working 
collaboratively with providers to align incentives around 
payment models that will reward the overall health of the 
individual that many providers support.
    In closing, Aetna's acquisition of Humana is about creating 
positive change in the health care market. It is about being 
part of an effort to build a modern health care system built 
around the consumer. We believe that our acquisition will 
improve competition in the Medicare marketplace by providing 
affordable and higher quality products.
    Thank you for the opportunity to testify today, and I look 
forward to your questions.
    [The prepared statement of Mr. Bertolini follows:]
    
    
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                               __________
                               
    Mr. Marino. A good standard to set, Mr. Bertolini. Right in 
on time.
    Mr. Swedish?

  TESTIMONY OF JOSEPH SWEDISH, PRESIDENT AND CEO, ANTHEM, INC.

    Mr. Swedish. Thank you, Chairman Marino, Ranking Member 
Johnson, and Members of the Subcommittee. I am Joseph Swedish, 
president and chief executive officer of Anthem, and it is my 
honor to appear before you today. The work of this Committee 
and the dialogue we engage in will help shape the future of 
health care in America. I appreciate the opportunity to 
contribute Anthem's perspectives and experience.
    Several Committee Members represent communities served by 
Anthem's local health plans, and the Committee as a whole has 
been an influential advocate for positive change in health 
care. So I would like to begin by thanking you for your 
dedication, leadership, and partnership, and by reinforcing 
Anthem's commitment to continue our proud 75-year history of 
providing high-quality, affordable health benefits to the many 
local communities and diverse populations we serve.
    My written testimony details the complementary nature of 
Anthem's and Cigna's businesses, the market dynamics impacting 
this transaction, and our commitment to working cooperatively 
throughout the review process.
    But I would like to focus my remarks today on the most 
important beneficiaries of these proposed transactions--
consumers. Health care is undergoing an unprecedented 
transformation. And while affordability, access, and quality 
are goals unanimously shared by our health care system, they 
are not universally enjoyed by consumers.
    Together, Anthem and Cigna have the resources and 
capabilities to offer a broader portfolio of products and 
services to keep health benefits more affordable and promote 
accountable, higher quality health care for consumers. Simply 
put, the combination of Anthem and Cigna will allow us to 
provide better health insurance to more people.
    We will keep health care affordable by more efficiently and 
effectively addressing the number one cause of rising costs in 
health care, the cost of care itself. Our combined analytic 
capabilities will empower better informed decisionmaking 
between patients and physicians and help safeguard affordable 
access to remarkable new clinical discoveries, treatments, and 
technologies.
    Our combined health and wellness expertise will help fill 
gaps in recommended care and more proactively engage consumers 
in managing their own health conditions. We will expand access 
to a broader network of hospitals, physicians, and health care 
professionals so consumers receive the highest quality care 
available when and where they need it, and, finally, improve 
quality by expanding our innovative, value-based accountable 
care models that today represent more than $50 billion in 
reimbursement tied to better value, quality, and outcomes for 
members.
    Much of the attention around this acquisition focuses on 
competition. This is, certainly, an essential part of the 
dialogue. As a baseline, it is important to recognize that 
health care is fundamentally local, locally based, locally 
delivered, and locally consumed.
    Across the many diverse localities and business segments in 
which Anthem and Cigna operate, there is robust and growing 
competition. Given the very limited and in most areas no market 
overlap between Anthem and Cigna, competition will no doubt 
continue to flourish after the transaction is completed.
    There are many calculations, analyses, and opinions being 
expressed about what this transaction will mean for 
competition, but the true question to be asked is, what will 
this mean for the consumer? The simple answer is Anthem and 
Cigna together mean better health insurance for more people.
    Throughout my 40-year career in health care, I have worked 
diligently to instill a culture of innovation and collaboration 
across the many organizations I have led, and the combined 
company will be no exception.
    Separately, Anthem and Cigna have made meaningful progress 
in improving affordability, access, and quality for consumers. 
Together, we can and will do much more.
    We embrace the responsibility of this transaction and look 
forward to working with you and the entire health care system 
to expand access to affordable, high-quality health benefits.
    Thank you for the opportunity to testify today, and I look 
forward to your comments and questions.
    [The prepared statement of Mr. Swedish follows:]
    
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    Mr. Marino. Thank you.
    Mr. Nickels?

 TESTIMONY OF TOM NICKELS, EXECUTIVE VICE PRESIDENT, AMERICAN 
                   HOSPITAL ASSOCIATION (AHA)

    Mr. Nickels. Thank you, Chairman Marino, Ranking Member 
Johnson, and other Members of the Subcommittee. Thank you for 
inviting me here today. My name is Tom Nickels. I am executive 
vice president of the American Hospital Association. On behalf 
of our 5,000 hospitals and health system members and the 
patients we serve, I appreciate the opportunity to testify 
today.
    Anthem's proposed acquisition of Cigna and Aetna's proposed 
acquisition of Humana would further concentrate an already 
heavily concentrated health insurance industry by eliminating 
two of the largest five insurers and result in negative 
consequences for both health care consumers and providers.
    Many consumer groups and provider organizations have 
already expressed significant concerns about these massive 
acquisitions, and we believe both deals merit the highest level 
of scrutiny from both Congress and the Department of Justice. I 
would like to focus on some of our specific concerns with each 
deal and take issue with a number of claims some are making to 
try to defend the proposed acquisitions.
    First, the insurers claim they are seeking to acquire 
companies that have complementary business lines and that there 
would be no overlaps leading to increased market consolidation. 
We are very skeptical of these claims.
    In addition, given Anthem's affiliation with the Blue Cross 
Blue Shield system, we are concerned about the negative 
consequences for consumers and health care providers that could 
result from further entrenching the powers of the Blues' plans 
that currently dominate the insurance market in nearly every 
State.
    Second, the insurers say that all health care is local. 
However, they cite national statistics on the number of 
competitors instead of the actual competition in local markets. 
According to our analyses, which are done in the same manner 
and with the same data that the DOJ will use in making 
competitive assessments, more than 800 markets for the Anthem 
deal and more than 1,000 markets for the Aetna deal lack 
sufficient local competitive alternatives.
    In addition to the lack of competition in local markets, 
there are high barriers to entry in the commercial insurance 
market. For example, insurers point to Oscar as a new 
commercial health insurance company. However, it is one of only 
two for-profit companies that were not already insurers to 
enter State marketplaces so far. It also has penetrated only a 
single urban market and lost a reported $27.5 million last 
year. The company's founder recently described entry into the 
insurance market as ``daunting.''
    Meanwhile, the Aetna-Human deal would affect Medicare 
Advantage plans in more than 1,000 markets that serve more than 
2.7 million seniors. These markets would become even more 
concentrated, and 97 percent are already highly concentrated. 
The potential for further concentration would threaten the 
fiscal protection the Medicare Advantage program provides for 
enrollees and would likely result in higher out-of-pocket costs 
and fewer benefits and even narrower networks.
    Just yesterday, the GAO released a report urging CMS to do 
a better job of ensuring that networks are adequate.
    Third, we are very concerned that both of these deals could 
derail the momentum hospitals have led to improve the Nation's 
health care delivery system. Despite claims that commercial 
insurers are fostering innovation, they continue to benefit 
financially from both squeezing provider payments and riding 
the wave of hospital efforts that are resulting in more 
efficient and higher quality care.
    There is no evidence that larger insurers are more likely 
to implement innovative payment and care management programs. 
In fact, concentrated delivery system reform efforts have 
tended to emerge from other sources, such as provider systems 
and nonnational players.
    Fourth, we are concerned that any potential benefits the 
insurance companies realize from these deals will not be passed 
on to consumers. Insurers do not have a good track record of 
passing any savings from an acquisition on to consumers, and 
there is no reason to believe these transactions would be 
different.
    Fifth, if these deals are allowed to close, the negative 
impact on providers and consumers could be enduring. 
Consolidation that occurs now is unlikely to be undone if it 
later proves anticompetitive.
    Lastly, it is unlikely that divestiture agreements can be 
reached to reduce the anticompetitive impacts. It is also 
unlikely that other competitors have the capacity to enter 
these markets as the scope and scale of the acquisitions are 
unprecedented.
    In conclusion, some have compared the insurance deals to 
those in the telecommunications arena because of the size and 
potential to contort the market and harm consumers. DOJ was 
ready to challenge the telecommunication deals, and it also 
should be ready to challenge these insurance deals, if it finds 
that these transactions threaten the vitality of our health 
care system and the health and welfare of consumers across the 
Nation.
    We look forward to working with the Subcommittee to make 
sure that consumers continue to have access to high-quality, 
affordable health care in their communities. Thank you very 
much.
    [The prepared statement of Mr. Nickels follows:]
   
   
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    Mr. Marino. Thank you.
    Dr. Gurman?

             TESTIMONY OF ANDREW W. GURMAN, M.D., 
         PRESIDENT-ELECT, AMERICAN MEDICAL ASSOCIATION

    Dr. Gurman. Good afternoon. I would like to thank Chairman 
Marino, Ranking Member Johnson, and the Subcommittee for 
inviting us to participate in this oversight hearing on health 
insurance mergers and their impact on competition.
    Physicians want to participate in a health care delivery 
system that allows us to deliver high-quality and efficient 
care to our patients. We believe that competition is an 
excellent prescription for achieving that goal. Competition 
among health insurers can lower premiums, enhance customer 
service, and spur innovative ways to improve quality while 
lowering costs. Patients benefit when they can choose from an 
array of insurers who compete for their business by offering 
desirable coverage at affordable prices.
    Consolidation, on the other hand, compromises the ability 
of physicians to advocate for their patients. In practice, 
market power allows insurers to exert control over clinical 
decisions, which undermines the doctor-patient relationship and 
eliminates crucial safeguards of patient care.
    This underscores what ultimately is at stake here--the 
health and safety of America's patients.
    Our annual study of commercial health insurance markets, 
which was provided to you, utilizes metrics set by the 
Department of Justice and the Federal Trade Commission to 
classify market concentration. The results point to a near 
total absence of competition among health insurers with 70 
percent of markets rated as highly concentrated.
    Meanwhile, a recent Commonwealth Fund study indicates that 
competitive conditions in Medicare Advantage markets are even 
more dire. And in the national market where large employers 
purchase coverage, the proposed mergers being examined today 
would pare the five national players down to three.
    We believe that there must be a rigorous review of proposed 
mergers according to the federally established standards to 
determine their effects on competition and their consequences 
for patient care.
    In 2010, the DOJ found that the proposed Blue Cross merger 
in Michigan would have resulted in ``the ability to control 
physician reimbursement rates in a manner that could harm the 
quality of health care delivered to consumers.'' The same 
analysis should be applied to pending mergers.
    Competition, not consolidation, has been shown time and 
again to benefit patients. One study found that increased 
competition among insurers was associated with more generous 
prescription drug benefits.
    According to several studies, past mergers led to increased 
health insurance premiums. In the wake of a 2008 merger in 
Nevada, premiums spiked by almost 14 percent. ``If past is 
prologue'', notes Professor Leemore Dafny, ``consumers can 
expect higher insurance premiums'' due to consolidation.
    Irrespective of premium hikes, lower physician rates in and 
of themselves can also harm patients by artificially degrading 
available care. This is the essence of monopsony power, whereby 
market control suppresses the quality or quantity of services.
    Our analysis of the commercial market share effects of the 
proposed megamergers reveal that they would enhance market 
power in as many as 97 metropolitan areas within 17 States. The 
Anthem-Cigna merger alone would enhance market power in 85 
metropolitan areas within 13 States, while the Aetna-Humana 
merger would combine two of the four largest Medicare Advantage 
insurers to form the largest such entity in the country. This 
is in addition to the impact on the national market if the so-
called big five becomes the big three.
    We are at a critical decision point on health insurance 
mergers because, once consummated, there is simply no going 
back. Post-merger remedies are likely to be both ineffective 
and highly disruptive. You cannot unscramble an egg.
    Thus, we believe that the time for heightened scrutiny and 
careful consideration is now, before proposed mergers take 
effect and patients are irreparably harmed.
    The solution lies in more, not less, competition. It begins 
by recognizing that coordinated care does not require massive 
consolidation. The good news is that there are steps that 
regulators and lawmakers can take right now to ease barriers 
and foster competition. These include facilitating new entry 
into hospital markets and eliminating program integrity and 
antitrust roadblocks to physician innovation.
    We look forward to working with the Subcommittee to advance 
a vision for the future of American medicine in which 
competition, when allowed to flourish, can promote the delivery 
of high-quality, cost-effective care.
    Thank you, sir, and thank you to the Committee for your 
continued efforts on this issue. And I have to tell you, having 
first visited this Congress as a 10-year-old schoolboy, what a 
thrill it is for me to be here today. Thank you so much.
    [The prepared statement of Dr. Gurman follows:]
    
    
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    Mr. Marino. Thank you, sir.
    Professor King?

  TESTIMONY OF JAIME S. KING, PROFESSOR OF LAW, UNIVERSITY OF 
              CALIFORNIA, HASTINGS COLLEGE OF LAW

    Ms. King. Chairman Goodlatte, Subcommittee Chairman Marino, 
Committee Ranking Member Conyers, and Subcommittee Ranking 
Member Johnson, and Members of the Subcommittee, I very much 
appreciate the opportunity to testify on the potential impact 
of the proposed mergers on consumers, competition, and the 
American health care system.
    After decades of increased consolidation in provider and 
insurer markets, resulting in ever-escalating health insurance 
premiums and health care expenditures, the American public has 
begun to demand more accountability for health care costs from 
their providers, insurers, and policymakers.
    Reform efforts, big and small, have started to shift the 
playing field for providers and insurers. And in many ways, the 
proposed mergers appear to be more about staking out territory 
and acquiring leverage in the new health care economy than 
anything else.
    How the dust settles in our health care system will have 
significant implications for the lives of all Americans, the 
efficient functioning of our economy, and the well-being of our 
Nation. We must be cautious and deliberate in our actions.
    Policymakers and government agencies charged with 
overseeing the health care system must be both exacting in 
their analysis of the proposed mergers on existing product and 
geographic markets. But they also have to have the vision to 
see the broader picture of how these mergers will affect 
consumers across the Nation and the health care system as a 
whole, in the years to come.
    The proposed mergers present several risks to tens of 
millions of affected consumers in an array of private insurance 
markets throughout the country, including individuals, small 
group, large group, self-insured, and Medicare Advantage 
markets. A recent study by the Government Accountability Office 
found that market share was highly concentrated into the top 
three insurers in individual, small group, and large group 
markets in 37 States.
    In reviewing the proposed merger, the Department of Justice 
will consider whether the mergers will likely lead to increased 
premiums, reductions in quality and innovation, or other harms 
to competition and consumers.
    In terms of premiums, as we have heard before, the research 
consistently found that increased premiums occurred in the wake 
of an insurance merger. While there is some evidence that 
consolidation among insurers can result in reductions and lower 
provider reimbursements, no evidence has ever found that those 
savings were returned to consumers. So basically, physicians 
will make less money and consumers will continue to overpay for 
health care.
    This is a trend that the American consumer can no longer 
sustain. Private insurance premiums are at their highest levels 
in history, almost approaching $17,000 for the average family.
    Some have argued that the medical loss ratio will prevent 
consolidated mergers from increasing premiums, but the MLR 
depends on competition to function. And in markets without 
competition, the MLR can be gameable. Because it limits 
administrative costs to the percentage of total premiums, in 
the absence of competition, insurers have incentive to go ahead 
and allow provider reimbursement rates to grow and increase 
overall premiums, thereby increasing their overall share of the 
pie.
    Moreover, the MLR does not apply to enrollees in self-
insured plans, which make up over half of the private insurance 
market, leaving them still at risk of premium increases.
    In terms of the potential negative impacts to quality and 
competition, I want to say a little bit about Medicare 
Advantage and the health insurance marketplaces. America is not 
getting any younger and a strong presence in the Medicare 
Advantage markets will be an important point of leverage for 
health insurers in the future.
    Unfortunately, these markets are already highly 
concentrated throughout the country, with 97 percent of 
counties exceeding merger guideline standards for high 
concentration.
    Medicare Advantage was designed to operate in a competitive 
market, and incentives to promote quality and innovation in 
those plans will not function in the absence of competition 
from other Medicare Advantage plans. There is evidence that 
consumers differentiate between these products and traditional 
Medicare, and they have been treated as separate markets by the 
FTC in the past.
    Similarly, this effect on quality and innovation can also 
occur in markets subject to the medical loss ratio. Not only 
would mergers eliminate key potential competitors in these 
markets, but they also may serve to chill the incentives of 
these established insurers to expand their territory into the 
space and increase competition. The same can be said for the 
State health insurance markets.
    Insurers may try to overcome these potential 
anticompetitive effects by claiming that their mergers will 
produce procompetitive effects, efficiencies. Things like 
consumer engagement and helping with the transition to value-
based goals and plans will be beneficial, but they also have to 
be merger-specific. They have to show that they will occur in 
the absence of a merger. They also have to show they will be 
cognizable and cannot be achieved through anticompetitive 
means.
    So in conclusion, the insurance companies today have argued 
that all insurance, like politics, is local. But just as we 
know that the broader political climate and decisions made in 
Washington have great effects on all of us back at home, the 
same is true of health insurance. Thank you.
    [The prepared statement of Ms. King follows:]
        Prepared Statement of Jamie S. King, Professor of Law, 
           University of California, Hastings College of Law

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    Mr. Marino. Thank you.
    Mr. Haislmaier?

 TESTIMONY OF EDMUND F. HAISLMAIER, SENIOR RESEARCH FELLOW OF 
         HEALTH POLICY STUDIES, THE HERITAGE FOUNDATION

    Mr. Haislmaier. Mr. Chairman, thank you, Members of the 
Committee, as well, for inviting me to testify today.
    In response to the Committee's invitation, I conducted an 
analysis, which I have presented in my written testimony, of 
the markets for the respective products of these companies. I 
will simply make a few observations here in my oral testimony, 
most of which are also in my written testimony.
    My analysis used enrollment data, looking at all of the 
country by State. It was divided for geographic presence--I 
give the reasons for that--and also by product line. This is 
for the comprehensive insurance market.
    There are five market segments. I looked at individual, 
fully ensured employer group coverage, Medicare Advantage, 
self-insured employer group plans for which an insurer provides 
only administrative services, and Medicaid managed care.
    In looking at the specific mergers, as I noted, nationally, 
40 percent of Humana's business is in the Medicare Advantage 
line. That is 40 percent of their total enrollment. When you 
look at the two companies on a national level, it seems fairly 
obvious to me that Aetna's acquisition of Humana is principally 
about acquiring Humana's Medicare Advantage business. It has 
been noted by others, I believe, when you combine those two 
companies, the net position would be that the company would 
have 25 percent, roughly, of the national market. That, of 
course, will vary substantially by State. I break out in the 
table the State variation.
    One of the points that I make in the table and in the 
testimony is that in most States, the effect even in that 
market will be relatively small. There are some notable 
examples of exceptions, where both carriers have a substantial 
presence already in the Medicare Advantage market that would be 
made even bigger.
    Aside from Medicare Advantage, my analysis found few other 
places that would result in any significant additional 
concentration in other States or product lines. The one 
exception being Georgia, where Humana already has 58 percent of 
the individual market, and merging the two would bring that up 
to 65 percent.
    But by and large, there is not a lot of overlap, as you can 
see in the table.
    With respect to Anthem's proposed acquisition of Cigna, one 
needs to start by understanding the unique features of each 
company. Eighty-four percent of Cigna's covered lines are 
administrative services for self-insured employer plans. In 
fact, I have a Cigna card because my employer is self-insured 
and uses Cigna.
    Anthem, however, is a collection, really, of 14 Blue Cross 
plans. So in those States where Anthem operates a Blue Cross 
plan, virtually anything Anthem does in terms of an acquisition 
will take a big insurer and make it bigger. There is almost no 
way to escape that, and that is true in the self-insured 
market, in this example.
    Outside of those 14 States, though, I found very little 
evidence that there would be any significant impact. In most 
States, there would be no impact whatsoever because Anthem 
simply lacks a presence and, as I said, Cigna's presence is so 
concentrated in one market subset.
    Beyond that, I also looked at another acquisition, which I 
thought we were going to talk about--I will briefly mention 
that--of Centene's acquisition of HealthNet. That is simply, as 
I describe in the testimony, an insurer expanding its 
footprint. HealthNet only operates in four States, and Centene 
does not operate in three of those four with any significant 
presence.
    Now Chairman Goodlatte had mentioned and I was asked to 
comment on some of those effects that might be behind this from 
the Affordable Care Act. I do believe some of those provisions 
in the Affordable Care Act may be responsible for some of the 
thinking behind the mergers. Certainly, the Affordable Care Act 
makes the administrative services business for fully insured 
employer plans a more attractive business for the insurer. That 
is also likely to grow as employers attempt to evade the cost-
increasing mandates in the Affordable Care Act.
    The other problem, of course, is that a lot of what the 
Affordable Care Act does is to limit choice and competition in 
standardization to treat insurance like a commodity and 
insurers like commodity producers. So from that perspective, it 
is not terribly surprising that you would see insurers behaving 
like commodity producers or regulated utilities and merging for 
scale.
    Mr. Chairman, thank you for the opportunity to testify. I 
hope the information I presented is helpful to the Committee in 
understanding the markets involved and the companies involved. 
I would be happy to answer any questions.
    [The prepared statement of Mr. Haislmaier follows:]
    
    
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                               __________
                               
    Mr. Marino. Thank you.
    I will now recognize myself for 5 minutes of questions, and 
my colleagues will then follow.
    Mr. Bertolini, some time ago we heard testimony that 
insurance policies are becoming narrower and, as a result, 
consumers end up paying more for the services or drug out-of-
pocket expenses, et cetera. Would you comment on this potential 
trend and how your merger would impact the breadth and services 
of drugs covered under your policies?
    Mr. Bertolini. Thank you, Mr. Chairman, for your question.
    As I mentioned earlier, health care premiums are not 
established in the abstract. They are directly related to the 
underlying costs. So in places where we have narrower plan 
designs or narrower networks, those are designed to try to 
impact the cost of care. And largely, the people who buy those 
policies are the people who are using those providers already 
and using those services. So it relies on broader breadth of 
product across multiple competitors in order to be able to 
provide enough services for everybody in a market. But when we 
look at the people who choose our plans, particularly on the 
public exchanges, they are choosing our plans because they are 
using those providers and they need the benefits that we cover.
    Mr. Marino. Thank you.
    Mr. Swedish, can you respond to that also?
    Mr. Swedish. Yes. I will maybe take a little different tack 
in that we work very collaboratively with the physician 
community, particularly focusing on buildout of provider 
collaboration models.
    A great example is our pursuit of value-based payment 
methodologies. In doing so over the last couple of years, now 
53 percent of our payment to providers is based on value--i.e., 
outcome-driven. In that regard, in answer to your question, 
together with the provider community, we are looking at 
building out more affordability for our members, particularly 
in the area of controlling drug spend, which is escalating at a 
phenomenal rate.
    Just last year, you know that pharma pricing increased 13 
percent. We believe that is escalating year over year.
    So, again, working in collaboration with providers in a 
value-based arena, we believe we can demonstrate increasing 
affordability to our members.
    Mr. Marino. I am going to stick with you for a moment, Mr. 
Swedish. I am from a very rural area, the 10th Congressional 
District of Pennsylvania, a lot of farm people, a lot of blue-
collar workers. What impact is your merger going to have on the 
cost of health care for these individuals, and accessibility?
    Mr. Swedish. Absolutely, thank you, Mr. Chairman.
    There are three main elements regarding the combination of 
two companies that are very complementary. The core elements 
are affordability, access, and the pursuit of increased 
quality, quality of safety, quality related to service. In that 
regard, we believe that the combination will translate 
especially to affordability as our two organizations, number 
one, leverage the combined assets, especially in and around 
data access, creating better health care analytics, and then 
build out evidence-based protocols with our provider partners; 
and number two, then what savings we can create in terms of 
efficiencies of operations. Those savings then will go to the 
consumers by way of better premium support.
    Mr. Marino. Thank you.
    Mr. Haislmaier, as you heard, I represent a very rural 
area, and I continually hear from my constituents, physicians, 
hospitals, that Obamacare is just driving the price up 
astronomically to the point where some of the hospitals and 
physicians believe they cannot stay in business and my 
constituents cannot afford the payments associated with that.
    I know you talked a little bit about how Obamacare does 
have an impact. Would you expand on that somewhat, please?
    Mr. Haislmaier. Well, the legislation subsidizes some 
people, but the number of people it subsidizes is only a 
fraction of the number of people whose coverage was 
artificially--the cost of which was artificially increased by 
regulation.
    So in other words, I did this analysis separately a few 
months ago, and we published it in connection with the court 
case, and we did it by State, I should say, too. But when you 
look at the number of people in the individual and small group 
markets that are subject to the ACA regulatory requirements 
that drive up the cost of coverage, that number is about three 
times the number of people who actually got a subsidy to offset 
those increases. In other words, only about one-quarter of the 
population that the additional costs were imposed on actually 
qualifies for a subsidy through the exchange to help them with 
it.
    So I think what you are hearing from your constituents are 
those other people who are small-business owners typically or 
individuals who are self-employed who make too much money to 
get a subsidy on the exchange who are complaining because they 
saw their premiums go up, but they did not get any help with 
paying for that extra cost.
    Mr. Marino. Right. Thank you.
    My time has expired. The Chair now recognizes the Ranking 
Member, the gentleman from Georgia, Congressman Johnson.
    Mr. Johnson. Yes, thank you.
    Mr. Haislmaier, to what do you attribute the decline in 
double-digit premium increases in this country over the past 
few years?
    Mr. Haislmaier. I am sorry?
    Mr. Johnson. To what do you attribute the decline in the 
double-digit premium increases?
    Mr. Haislmaier. Decline in double-digit premium increases?
    Mr. Johnson. Yes.
    Mr. Haislmaier. In what sector, sir?
    Mr. Johnson. So you do not recognize that premiums costs, 
the rate of escalation in premium growth has declined since the 
passage of the Affordable Care Act?
    Mr. Haislmaier. Well, no, actually, it has not. My 
colleague has done data on that that we published on premiums. 
I would be happy to have him share it with you, but it all has 
been published on the growth in premiums.
    Mr. Johnson. Okay, thank you.
    Mr. Nickels, Mr. Bertolini has testified that there are new 
market entrants, including providers, that are offering health 
insurance products that produce meaningful competition to 
health insurance companies, and that is one of the reasons why 
they would justify the merger. What is your response to that?
    Mr. Nickels. Yes, it is correct that there are more 
hospitals coming into the market. Although to refer to that 
statistic, I think there were 15 new hospital plans in the last 
3 years, so that is not a huge number. But there are some that 
are coming in. Some are interested. Consumers are interested in 
these kinds of options.
    But again, we are at the infancy stage here, and these 
plans pale in comparison to the size of these potential 
mergers.
    So is it a positive step? Yes. But it should not be used to 
justify these mergers because, again, these are fragile 
entities that are just getting into the market right now.
    Mr. Johnson. All right, thank you.
    Mr. Bertolini, several of your fellow witnesses cite a 
Commonwealth Fund study published last month that found that 97 
percent of Medicare Advantage markets are highly concentrated 
and characterized by a lack of competition. What is your 
response to that finding?
    Mr. Bertolini. Congressman Johnson, I can only comment on 
the data that we have about the markets that we are in. In 
those markets, after the acquisition, 8 percent of Medicare 
beneficiaries will select our products. Ninety-two percent will 
not. In markets where we have nonrural areas, 18 competitors, 
and in rural areas, 10 competitors, we continue to see people 
entering the market. And our comment around 15 being provider-
owned is not about whether or not they justify the mergers, but 
they do justify the fact that barriers to entry are not as high 
as others would comment, and it is rather lower barriers to 
entry, as a result of the opportunities afforded by government-
funded programs like Medicare Advantage.
    Mr. Johnson. Okay. Thank you.
    Professor King, all the way through Emory University just 
outside of my district, welcome.
    Ms. King. Thank you.
    Mr. Johnson. I would like to ask you, why is the medical 
loss ratio insufficient to guarantee that premiums will not be 
raised after consolidation? You explained it, but I want you to 
put a little bit more meat on that explanation.
    Ms. King. Absolutely. So the medical loss ratio is a key 
tool toward constraining insurer premiums and insurer profits 
and keeping the cost to health care down. But it is 
insufficient on its own, especially in the absence of 
competition, to maintain costs in this market and promote 
quality.
    So medical loss ratio, first of all, does not apply to 
about half of the privately insured individuals in the market 
who get their insurance from self-insured providers.
    Mr. Johnson. Okay, I understand.
    Ms. King. So if it does not apply to them, then premiums 
can go up, and it is not going to protect them.
    Mr. Johnson. A merger, a consolidation, would lead to those 
self-insured plans----
    Ms. King. Being exposed to higher premium increases. That 
is right.
    Mr. Johnson. All right. Let me stop you.
    Do you, Mr. Swedish, or you, Mr. Bertolini, disagree with 
that?
    Mr. Swedish. Yes, sir, I would like to address that for 
just a moment.
    There is a complementary nature in the combination of our 
two companies. The fact is that Cigna presents a very large 
engagement in the administrative services only marketplace, 
meaning that we are supporting very large employers in national 
accounts. Those are the organizations that demand that level or 
type of service and product offerings.
    We believe that what is critically important for the 
Committee to understand is that there are many competitors in 
that space; number two, that these are highly sophisticated 
buyers of administrative service only arrangements; number 
three, because it is ASO, the savings go back to the employer.
    What is fascinating is that what we have found with respect 
to large employers is that there are at least 130 unique health 
benefit companies serving that sector of the marketplace. In 
2014, there were 30 new companies competing in that market. 
Finally, the GAO report found that an average of 11 insurers 
compete for large group customers.
    So in any event, we believe it is highly competitive and, 
quite frankly, serves that marketplace very well, in terms of 
the competitive environment that we function in.
    Mr. Johnson. Thank you. I yield back.
    Mr. Marino. Thank you.
    The Chair now recognizes the gentleman from Georgia, 
Congressman Collins.
    Mr. Collins. Thank you, Mr. Chairman.
    This is a concern for me, and I know the Chairman has 
spoken to this, being from a rural area. But there is also the 
issue of mergers and also leverage and nonleverage. The people 
at the bottom of the line who get caught in this are the actual 
folks who are your customers and also customers, frankly, of 
the hospitals and doctors, as well. It is not good--like in my 
district, we have had this happen on a couple of occasions--
when the two are not able to negotiate. So we end up sending 
out letters to 38,000 and 40,000 people saying teachers in your 
area will not be able to use your local hospital because we 
cannot come to a satisfactory agreement. Although they are 
covered for the entire year, their contracts do not overlap 
with the hospitals, so insurance companies and hospitals 
negotiate on a different timetable then actually was sold, the 
policy, which, again, no one, frankly, understands.
    I have been listening to this debate today. The really 
interesting part, Mr. Bertolini and Mr. Haislmaier note in 
testimony that Humana has 58 percent of the individual market 
in Georgia and that number is expected to rise to 65 percent 
after the merger closes.
    Tell me why I should not be concerned about this level of 
concentration and how we can ensure consumers not only in 
Georgia, but I am concerned that the Ninth District of Georgia 
has a sufficient number of insurers to choose from in this 
process.
    Mr. Bertolini. Thank you, Congressman, for your question.
    The market currently has 10 competitors and choices for 
people to choose from, so concentration is one measure of 
whether or not there is a problem from a competitive 
standpoint, and we will cooperate with the Department of 
Justice in reviewing that opportunity and those issues.
    In regard to your comment about provider and health plan 
negotiations, I would state that the current fee-for-service 
payment system that causes providers and payers to have this 
conversation is why our health care costs are so high. Unless 
we change that dynamic to a different payment model focused on 
outcomes and on whole case and improving the health of 
individuals, this kind of dynamic will only continue and will 
leave the member in the middle.
    Mr. Collins. I think they are already left in the middle. I 
do want to continue on that, and I understand that there are 
choices, but those choices seem to be narrowing more and more, 
especially with the different plans. When you get to a market 
share of close to 65 percent, that does tend to at least look 
like you are cutting off avenues, especially where there is a 
possibility of not being able to buy across State lines and 
other things like that, you are taking an area--I mean, in this 
hearing just recently, we talked about this. It is not just 
this market but the PBM market, which I have a great deal of 
problems with because basically they are bent on destruction 
and killing the independent pharmacies.
    But as we look at this, why would this not be a concern? I 
know there are options out there, but do you understand the 
perception from the community that there is? I agree with you 
on outcome. I agree with you that we need to change some of the 
cost systems here. But when we look at this, I mean, Aetna and 
Humana are going to have 36 percent of the fully insured market 
in my area.
    I am just trying to get a grip on how you can explain that 
as being good when we, frankly, see problems in this all the 
time.
    Mr. Bertolini. Obviously, we have a Department of Justice 
review going on. To the degree that divestitures are required, 
we will make those.
    So we understand that there are some markets, a handful or 
so of markets where we have this kind of overlap that we are 
prepared to deal with appropriately. Most often, what we see 
happening now is that provider systems buy these capabilities 
from us when we decide to divest them.
    So I think we can actually create more competitors as a 
result of this combination.
    Mr. Collins. Okay.
    Mr. Haislmaier, would you like to respond to that?
    Mr. Haislmaier. No, I think that is a fair 
characterization. I was simply pointing out the extent to which 
concentration did or did not exist, Georgia being an example 
outside of Medicare Advantage where this merger would produce 
concentration.
    As Mr. Bertolini has said, that may be something that will 
be remedied by the State or Federal Government in insisting on 
a divestiture.
    There is a much larger issue about competition that is not 
part of this hearing, which is sort of that the whole business 
model of everybody needs to be updated, but that would be a 
topic for another day.
    Mr. Collins. I appreciate that, but I think it is part of 
this hearing. I think that is the issue. All companies, not 
just in this industry, there are others merging as well. You 
have a lot of good folks sitting behind you and also outside 
this room who can tell the antitrust, they can tell the letter 
of law. The problem many times is not, are we following ``the 
letter of the law'' in mergers? It is the actual effect on the 
market, the actual perceived effect on the market, when dealing 
with hospitals or dealing with doctors.
    That is the concern that I have, the leverage issue. I have 
no problem with business models. They all change over time. But 
when you have a group that really is, frankly, at the mercy of 
the bigger players, and in my area that would be insurance 
companies and hospitals--you know the old proverb says, when 
elephants fight, the only thing that loses is the grass, okay? 
And the grass is the people that you serve.
    I yield back.
    Mr. Marino. The Chair recognizes the Congressman from 
Michigan, the Ranking Member of the full Committee, Congressman 
Conyers.
    Mr. Conyers. Thank you, Mr. Chairman.
    And I thank all the witnesses, too.
    Professor King, I am going to ask you several questions, 
and then I have a couple for Dr. Gurman. So pick your 
responses. You do not have to try to cover everything in all of 
the question.
    What are some of the negative effects of existing high 
levels of concentration in health care markets? Number two, 
what did studies of prior health insurance mergers reveal about 
their effects on competition? And why do you think the 
Department of Justice is keeping a close eye on the overarching 
impact of transactions for the entire health care system? And 
finally, is there any evidence that any savings from post-
merger efficiencies are passed on to the consumers?
    Take your choice.
    Ms. King. Okay. There is a lot there.
    So in terms of negative effects of prior mergers, this is 
one of the things that the FTC and DOJ look at when they look 
at horizontal mergers. They look at what has happened in the 
past.
    That is why Professor Leemore Dafny last week said that if 
past is prologue, here is what we anticipate that we will see.
    There have been two retrospective studies that have looked 
at health insurance mergers. I am sure you have seen these. One 
looked at Aetna and Prudential, and the other looked at 
UnitedHealthcare and Sierra. Both of them found, in the wake of 
those mergers, that there were significant price increases. The 
Aetna-Prudential merger came down with 7 percent premium 
increases, and then the UnitedHealthcare and Sierra came down 
with almost 14 percent increases in premiums in the wake of 
those mergers.
    One thing I want to emphasize about those mergers is that 
those were mergers where divestitures were used. So in those 
instances, it is not always easy to determine which markets are 
likely to see price increases and then target those 
appropriately.
    They did use a divestiture in Texas in the Aetna merger, 
and they found that that was an effective divestiture in that 
space. But nonetheless, premiums did increase in numerous, 
numerous affected markets as a result of those.
    So I think that is what we are seeing. We are also seeing 
in those mergers, in those prior mergers, that there was no 
impact on quality so quality of care did not increase. The 
promises that were made initially about how many improvements 
were going to happen and the things that the consumers were 
going to see as benefits in those spaces did not materialize.
    Mr. Conyers. Thank you so much.
    Ed, write some more to put in the record on this, because I 
wanted to ask our Dr. Gurman before time runs out to explain 
how health insurers' monopsony power endangers the quality of 
health care available to consumers.
    Mr. Bertolini and Mr. Swedish both contend that health 
insurance markets are flush with competition not only from 
traditional health insurance companies, but from new market 
entrants.
    What is your response to those two questions?
    Dr. Gurman. Thank you, Mr. Conyers. First of all, it is an 
honor to dialogue with you.
    The effects of mergers, which cause increased consolidation 
and not competition, are severalfold. As Professor Dafny said, 
the past is, unfortunately, prologue. So we have an ample 
historic record to show what has happened in the past.
    When there is monopsony power exercised, what happens to 
physicians is that if they are paid less than competitive 
rates, there is a downstream effect on patients, because 
physicians do not have the financial resources to invest in 
infrastructure, to invest in technology, to invest in staffing, 
patient education, customer service aspects of medical care. 
And they spend less time with their patients because they are 
dealing with all of the other regulatory issues.
    So the effect of monopsony is not only on physicians but it 
also is on patient care.
    Mr. Conyers. Thank you very much.
    Let me close with this one question. Professor King, did 
the studies of prior insurance mergers reveal the effects of 
competition on consumers?
    Ms. King. They did. In terms of price and premium 
increases, they did. Are you asking about overall health of 
consumers and their outcomes?
    Mr. Conyers. Well, if the Chairman will let me squeeze it 
in, yes.
    Mr. Marino. Go ahead.
    Ms. King. I do not know of any studies. That is a great 
question, in terms of how their outcomes faired. But I know 
that overall quality of care in what was measured in those 
regards was not. There was no effect found.
    Mr. Conyers. Thank you so much. And I thank all the 
witnesses.
    Mr. Marino. The Chair now recognizes the gentleman from 
Texas, Congressman Ratcliffe.
    Mr. Ratcliffe. Thank you, Chairman.
    As I noted in a recent hearing that we had in here on 
competition in the health care marketplace, the Texans that I 
represent have, in most cases, been adversely impacted and, in 
many cases, to a devastating extent, impacted by the perversely 
named Patient Protection and Affordable Care Act.
    The folks in my district, certainly, have not found this 
law to provide affordable care or care that protects their 
interests with respect to choice, with respect to quality, with 
respect to cost.
    Health care is incredibly personal, and I think we need to 
keep that in the forefront of our mind as we talk about these 
mergers today.
    So conversations about the health care marketplace can get 
technical very quickly, so I want to begin with a very basic 
question for both Mr. Bertolini and for Mr. Swedish. I ask that 
you answer these quickly because I want to get to a number of 
questions.
    So, Mr. Bertolini, in a nutshell, how do you think the 
merger between Aetna and Humana will benefit my constituents? 
In other words, specifically, how will it impact their premiums 
and their deductibles and the quality of care that they 
receive?
    Mr. Bertolini. Thank you, Congressman Ratcliffe.
    Our deal is largely a Medicare Advantage deal, so those 
prices are set by CMS and by the government, so we see no 
commercial impact in the State of Texas. So this is largely 
around prices that get set by the Federal Government, which 
have gone down 10 percent since 2010 while trend has grown up 
20 percent. So we have actually created savings for those 
members through that time frame, those beneficiaries.
    Mr. Ratcliffe. Okay.
    Mr. Swedish, same question for you.
    Mr. Swedish. Certainly, thank you, Mr. Ratcliffe.
    The combination, we believe, will lead to better value for 
consumers through three core elements: provider collaboration, 
consumer focus, and affordability.
    The second point is that our combination is highly 
complementary in the sense that both geography and product 
focus is perfectly aligned in terms of maximizing the strengths 
of both companies in terms of how we are going to better serve 
the marketplace, whether it is small group, large group, the 
individual markets, other elements, core elements of the 
services we provide.
    Finally, let me underscore that health care is unique, 
because it is highly localized, and there is a competitive 
nature in each one of those localized markets, which, 
obviously, we believe we will be a very effective competitor in 
those markets, bringing value to our members.
    Mr. Ratcliffe. Thank you, Mr. Swedish.
    Dr. Gurman, do you want to comment on that? My question for 
you actually tied into that. The district I represent, the 
Fourth Congressional District of Texas, includes a very rural 
area, so I would like you to address how the proposed merger 
would affect quality and affordability of health care delivery, 
specifically in rural areas like many of the parts that I 
represent.
    Dr. Gurman. Thank you, Congressman.
    First of all, in respect to what you said earlier, our 
analysis of the Aetna-Humana merger in the commercial market 
space says that for combined HMO-PPO and point of service 
plans, as well as in those individual considerations, that 
Texas is one of four States where there would be an effect. We 
are not talking about Medicare Advantage. This is commercial 
insurance. This is all in my written testimony. I will be happy 
to follow up with your staff, if you need more information 
about that.
    In response to your question regarding how this affects 
rural areas, I talked before in response to Mr. Conyers about 
the effect on patients. What happens, though, in consolidated 
markets, particularly when the consolidation goes to a company 
which is far away is that my ability to advocate on behalf of 
patients can be compromised. Every once in a while, you get a 
patient who has an unusual medical need, care need, whatever. 
When I talk to the medical director who is local, he knows that 
Andy Gurman is a reasonable guy who is dedicated to his 
patients, I hope he knows that, and we can have a discussion 
about what we are going to do, what resources we are going to 
mobilize, to take care of this patient's particular needs.
    If the medical director that I am talking to is in Timbuktu 
somewhere as part of a megamerged conglomerate, I do not have 
that personal relationship and it becomes much harder to do 
that.
    The other problem is that if there is severe monopsony or 
market control, narrow networks sometimes are a consequence 
with that. If I make too much noise, I may find that I am not 
in the network.
    Mr. Ratcliffe. Okay, thank you.
    Mr. Haislmaier, I want to quickly get to you. One of the 
stated benefits of these mergers has been the efficiencies that 
are expected to reduce costs to customers, in particular. With 
respect to past health insurance mergers, do you have any data 
that supports whether or not the savings have actually been 
passed on to customers?
    Mr. Haislmaier. No, I do not.
    Mr. Ratcliffe. So do you have any concerns that these 
mergers will present additional barriers of entry into the 
health care marketplace?
    Mr. Haislmaier. As I pointed out in my testimony----
    Mr. Marino. The gentleman's time has expired, but you can, 
please, answer that question quickly.
    Mr. Haislmaier. Thank you, Mr. Chairman.
    As I pointed out in my testimony, I am not saying that 
these are great, and I am not saying that they are terrible 
either. I am saying that they are what they are. What they are 
is a combination of companies, and they do have more or less 
effect depending on the product line and the place where the 
combination is taking place.
    Mr. Ratcliffe. Thank you.
    I yield back, Mr. Chairman.
    Mr. Marino. The Chair recognizes the gentleman from New 
York, Congressman Jeffries.
    Mr. Jeffries. I thank the distinguished Chair, and I also 
want to thank the witnesses for your testimony here today.
    Dr. Gurman, I believe on page 6 of your testimony, you 
cited a 2015 study by the Association of American Medical 
Colleges that the United States will likely face a physician 
shortage between 45,000 and 90,000 over the next 10 years. Is 
that correct?
    Dr. Gurman. That is correct, sir.
    Mr. Jeffries. I think you also cite projections by the 
Department of Health and Human Services that suggest a similar 
shortage is likely to occur of primary care physicians in the 
United States over that same time period. Is that right?
    Dr. Gurman. Yes, sir.
    Mr. Jeffries. As we see the health insurance market 
consolidate and merge, what is your view as to how these 
mergers and consolidations are likely to impact what is 
anticipated to be a physician shortage across the country that 
I think many would find interesting to know is particularly 
acute in rural America?
    Dr. Gurman. Thank you for that observation. It is of great 
concern. It is of concern to me as I get older and I want to 
know who is going to take care of me. It is of concern because, 
as markets consolidate, there can be a detrimental effect on 
physicians and physician practices. This can influence the 
career choices that people make, either to go into medicine or, 
once in medicine, what specialties to take.
    So our concern is that competition is better for patients, 
it is better for physicians, it is better for everybody, 
whereas consolidated markets give monopsony power to the 
insurers and makes it harder for the physicians and less 
attractive for physicians, particularly in primary care.
    Mr. Jeffries. Thank you.
    Professor King, I think you noted in your testimony that 
there is no evidence that savings or efficiency that result 
from these type of mergers in the past have resulted in those 
savings being transmitted to consumers. Is that correct?
    Ms. King. Yes, it is correct.
    Mr. Jeffries. And that analysis is based on a study of 
mergers within the insurance industry that have taken place in 
the past. Could you elaborate on that?
    Ms. King. Yes, that evidence is based on Professor Dafny's 
research that she did several years ago, and also a 2015 study 
that came out by Trish and Herring, just recently in 2015. They 
found in that study that they were able to suppress or push 
down provider reimbursement rates, which, as we noted, can 
compromise quality in some instances, but that the increase in 
margins on insurance were almost exactly met, which means that 
provider insurance profits went up but there was no 
transferring back to payers.
    Mr. Jeffries. Thank you.
    Mr. Haislmaier, I believe in response to a previous 
question, you indicated that you are unfamiliar with any 
evidence that these savings have ever been passed on to 
consumers. Did I hear your testimony correctly?
    Mr. Haislmaier. Yes, that is unfamiliar. That does not mean 
it does not exist. It just means I am not familiar with it.
    Mr. Jeffries. Okay. But you are an expert in this industry.
    Mr. Haislmaier. Yes, I think the question is really a bit 
off-topic because I am not expecting a great deal in the way of 
savings out of these mergers to start with. So saying, what do 
you do with the money that is saved, if there really is not a 
lot of savings? I mean, I am looking at these as really a lot 
of overlap where you are just consolidating two into one.
    This is not dissimilar to previous mergers. I mean, Aetna 
in 2013 bought Coventry. There was very little overlap between 
those two companies. There were States where Coventry had a 
presence and Aetna did not, and vice versa. We are not going to 
see much change.
    Mr. Jeffries. But should there not be a reasonable 
expectation that to the extent these mergers are going to be 
evaluated by the Department of Justice, presumably to determine 
whether there would be some public benefit or public detriment, 
that there would be some benefit inured by the consumers that 
we on this panel and those Members of Congress throughout these 
hallowed halls represent?
    Mr. Haislmaier. Well, the issue is not that they have to 
show benefit. The issue is, is there something detrimental 
about it? The presumption is that as long as there is nothing 
detrimental about it, you can go about doing your own business 
and dealing with whom you want and merging how you want.
    The same is true on the hospital sector. I mean, look, this 
is kind of why I am in the middle here, because we have the 
monopsonists complaining about the monopolists, and the 
monopolists complaining about the monopsonists. I mean, you are 
looking at hospitals consolidating so that the insurer has no 
choice but to deal with one system.
    So the issue from a regulatory consumer perspective is not 
whether they provide good. The issue is, do they do harm?
    Mr. Jeffries. My time has expired. But I would just note in 
closing, Mr. Chair, if you would permit me, that the two 
companies that are before us today and these distinguished 
gentlemen, of course, these are publicly traded companies, 
which means they have a fiduciary obligation to their 
shareholders. And I think the notion that the mode of analysis 
should simply be whether it is likely to result in detriment to 
the public is a misplaced way to approach public policy here, 
and I respectfully yield back.
    Mr. Marino. The Chair now recognizes the gentleman from 
Rhode Island, Congressman Cicilline.
    Mr. Cicilline. I thank the Chairman, and I thank the 
witnesses for coming before the Subcommittee and sharing your 
perspectives this afternoon, and for providing your written 
testimony.
    Given the size of the parties that are involved, these 
mergers will, of course, impact the lives of millions of 
Americans. It is very important that Members of this Committee 
fully investigate and evaluate the consequences that these 
proposed mergers will have on consumers, particularly, of 
course, the patients.
    My sense is that, broadly speaking, the proponents of the 
mergers have claimed that the consolidation will result in a 
better consumer experience by providing improved quality of 
care and at a reduced cost. More specifically, this claim 
arises from the idea that the merged insurers will realize 
savings from increased efficiencies and will pass these savings 
on to consumers.
    However, I must admit after reviewing the testimony, I am 
skeptical. If insurers are allowed to merge, they may, in fact, 
become more efficient, but the question really is, what 
evidence is there that these savings will be passed on to 
consumers and to patients? And what will be the impact on care?
    As has been mentioned, Dr. Dafny of Northwestern University 
noted in her testimony before the Senate Judiciary Committee 
that if you look at the studies on insurance mergers that have 
occurred already, they have led to increases in premiums even 
as many of these insurers pay lower rates to health care 
providers.
    So what I am really interested to hear from Professor King, 
if you could begin, is there any evidence that mergers of this 
magnitude and in this sector will actually produce cost savings 
to the ultimate consumer or patient?
    And to Mr. Haislmaier's point, even though there might be 
no evidence of detriment, is there any evidence of a benefit 
when the market shares are as big as these proposed mergers 
will result in?
    Ms. King. So to answer your first question, there is no 
evidence that these the savings in premiums are passed on to 
consumers. I looked really hard, and I found none.
    In terms of a detriment, a potential detriment, all of this 
is always going to be predictive. The FTC and the DOJ have to 
look at this potential merger and decide, is it likely to 
increase market power or entrench market power in these ways? I 
think the things they are concerned with: Is it likely to 
increase premiums? Is it likely to result in a loss of quality 
or innovation? And is it likely to harm competition?
    I think that what we have seen is that, historically, yes. 
Historically, prices are increased. Historically, we have seen 
no impact on quality in terms of it increasing or decreasing, 
but no evidence that it increases.
    In terms of harm to competition, you have to think about 
the fact that we are hoping to promote entry into these 
markets. And Mr. Swedish and Mr. Bertolini have said how 
important it is to be in the Medicare Advantage market, how 
important it is to be in the self-insured national market. 
These are places they would like to expand and grow.
    What they are doing is they are engaging in a merger to 
enter that space instead of entering it on their own and 
increasing competition in that space. I think that is something 
that we should really be thinking about. Is that a potential 
harm to competition, that instead of going into these areas on 
their own, they are attempting to acquire somebody who is 
already there and successful?
    Mr. Cicilline. Mr. Bertolini and Mr. Swedish both contend, 
at least in their written testimony, that health insurance 
markets are flush with competition not only from traditional 
health insurance companies, but from new market entrants, as 
you just mentioned, which include Accountable Care 
Organizations and other health care providers. Can you just 
respond to that assertion? Is that a sufficient safeguard 
against some of the concerns the Committee is expressing?
    Ms. King. Are you asking me?
    Mr. Cicilline. Yes.
    Ms. King. I am sorry. I thought you shifted. Can you ask 
the question again? I apologize.
    Mr. Cicilline. They both sort of make the argument that 
health insurance markets are flush with competition not only 
from traditional health insurance companies but from new market 
entrants, which include Accountable Care Organizations and 
other health care providers.
    Ms. King. Okay. So my sense of this is that we are 
definitely starting to see in certain markets, in the exchanges 
and in some other spaces, new entrants. We are certainly 
starting to see that from integrated delivery systems and 
larger provider organizations.
    But I am from California, and this is a little bit like 
saying we have had 2 rainy days and that is going to overturn 
the entire drought, right? It is not going to happen that way. 
This is encouraging. It is good to see new entrants into the 
market, but it is not by any stretch changing dramatically the 
amount of consolidation that we are seeing across the board.
    Mr. Cicilline. Thank you.
    I yield back, Mr. Chairman.
    Mr. Marino. Seeing no other Congressmen or Congresswomen, 
this concludes today's hearing.
    I want to thank all of our witnesses for attending.
    Without objection, all Members will have 5 legislative days 
to submit additional written questions for the witnesses, or 
additional materials for the record.
    The hearing is adjourned.
    [Whereupon, at 2:38 p.m., the hearing was adjourned.]




                            A P P E N D I X

                              ----------                              


               Material Submitted for the Hearing Record

     Response to Questions for the Record from Mark T. Bertolini, 
           Chairman and Chief Executive Officer, Aetna, Inc.
           
           
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]          
           
 
       Response to Questions for the Record from Joseph Swedish, 
                    President and CEO, Anthem, Inc.
                    
                    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]                    
                    
                    


                                

        Response to Questions for the Record from Tom Nickels, 
     Executive Vice President, American Hospital Association (AHA)
     
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


                                

    Response to Questions for the Record from Edmund F. Haislmaier, 
     Senior Research Fellow of Health Policy Studies, The Heritage 
                               Foundation

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



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