Antitrust Law Daily Wrap Up, ACQUISITIONS & MERGERS NEWS: Not everything should be bigger in Texas: medical association resistant to Aetna-Humana merger, (Oct 13, 2015)

By Kayla R. Bryant, J.D.

The Texas Medical Association (TMA) expressed its disapproval over the pending merger between Humana, Inc. and Aetna, Inc. According to an October 12 announcement, the TMA told the Department of Justice’s Antitrust Division that the state’s health insurance market would suffer due to the decreased competition, potentially resulting in higher prices for plans and lower prices for services. In its opinion, the merger could force physician practices out of business.

Market control. The largest state medical society backed its arguments with data showing that the Aetna-Humana company would have enhanced market power in several major Texas cities and markets. These markets include the combined health maintenance organization (HMO), preferred provider organization (PPO), and point of service plan markets. Dr. Joseph Valenti, chair of the TMA’s Council on Socioeconomics, pointed out that the merged firm would control 36 percent of the market in the state and that fewer plan options would give the state’s patients fewer choices in pursuing care.

Service pricing. The TMA is particularly concerned about the company’s ability to set prices for services. Valenti told the Justice Department that physicians rely on adequate payment to cover their costs and maintain profitable practices, and he expressed concern that the state’s small physician groups would have little leverage to negotiate favorable prices. If the insurer unilaterally reduced prices below the actual service costs or excluded the physician below the plan network, the practice could be forced out of business, which could jeopardize the local availability of plan services.

Mergers. This letter echoes the same concerns expressed by the American Hospital Association (AHA) in its similar address to the Justice Department. The AHA urged the close scrutiny of both this merger and the pending merger of two other insurers, noting that competition in at least 817 geographic markets could be reduced if they are approved. These mergers come after the health insurance market was transformed by the Patient Protection and Affordable Care Act (ACA).

Companies: Texas Medical Association; Humana, Inc.; Aetna, Inc.

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