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For Immediate
Release
4/09/07
CONTACT:
Joe Pittman
(724) 357-0151
State Senator Don White's Testimony
Presented
to U.S. Senate Judiciary Committee
The
following is a transcript of the testimony of State Senator Don White, Chairman
of the (Pennsylvania) Senate Committee on Banking and Insurance, presented to
the US Senate Judiciary Committee hearing today (April 9) in Philadelphia on the
proposed merger of Highmark and Independence Blue Cross:
Good Morning
Senator Specter and members of the Senate Judiciary Committee, I am
Pennsylvania State Senator Don White and I serve as Chairman of the
Senate Committee on Banking and Insurance.
It is an honor
to be invited by Senator Specter to testify at this important public
hearing and I would like to applaud him for scheduling this event. I
appreciate the opportunity to provide the Judiciary Committee with a
perspective of the Highmark/ Independence Blue Cross (IBC) merger from
the state government level and to discuss the concerns that I, and
others, have regarding this proposal. The potential affect on the
availability and quality of health care coverage in Pennsylvania could
be profound.
You have already
heard from the principal players in the merger, as well as from
officials from the health care industry and are fully aware of the
magnitude of this proposal. The questions Senator Specter posed to
Highmark and IBC prior to this hearing are most appropriate and
accurately summarize the concerns we all should have.
The state
legislature is moving rapidly to ensure maximum review and oversight
over this proposed merger occurs. Currently, under the Commonwealth's
GAA Amendments Act and the Insurance Holding Companies Act, the
Pennsylvania Department of Insurance is empowered to review proposed
mergers of for-profit health insurance providers. Such review is
intended to protect the interests of both policyholders and the
marketplace by directing the Department of Insurance to protect the
integrity of the insurance market through review of corporate
transactions for anti-competitive effect.
Unfortunately,
under current law, the Highmark-IBC deal, because it involves two
'Blues' organizations, is not subject to the same scrutiny.
In response, I
introduced Senate Bill 550 which would provide the Pennsylvania
Department of Insurance oversight power over mergers involving
non-profit health care insurers such as Blue Cross/Blue Shield. SB 550
will ensure this proposal comes under the same scrutiny as if they were
for-profit corporate transactions.
If the existing
gap in the Department's regulatory authority is allowed to persist, the
Department will remain unable to protect the interests of the Blue
plans' policyholders in ruling on corporate transactions, or review any
pending transaction involving the parent Blue plans for anti-competitive
effect. However, I am confident we will correct this gap in a very
timely manner. The state Attorney General must also have the authority
necessary to review this proposed merger and I am working with his
office to ensure that is the case.
I am encouraged
by this committee's concern about the quality and availability of health
care coverage in Pennsylvania. From what I understand there is
potential for review of this merger at the Federal level under the
Hart-Scott-Rodino Antitrust Improvements Act. I would assume Highmark
and IBC will file an advance notice of this merger with both the Federal
Trade Commission and the Department of Justice, since its value greatly
exceeds the thresholds that trigger this federal requirement. I
strongly urge this committee to recommend to those federal agencies that
they scrutinize this merger for its impact on competition in the health
insurance market and share their work with the state legislature, the
Insurance Department and our Attorney General. While Pennsylvania does
not have a state antitrust law, our Attorney General can take action
under the federal law. Therefore coordination between the state and
federal review is essential.
While economies
of scale and efficiencies may be achieved by this merger and result in
positive short-term benefits, there must be concern over its long-term
affects. Creating the third largest insurer in the nation with a
specifically defined geographic territory is not, I believe, in the best
interests of competition and the reality is competition is in the best
interests of the consumer.
There is no better regulator than a competitive marketplace – in
terms of bringing better service, better products and better prices to
consumers, and in terms of giving consumers and providers real and fair
choices. In my own district, I've seen the problems providers and
consumers face from a lack of competition in health insurance – it can
lead to some real predatory practices. We need to make sure such
practices are not spread across the Commonwealth through this merger.
Highmark and IBC
contend the merger should be approved based on the premise that it will
result in savings. If so, then there needs to be iron clad assurances
that those savings will occur not only in the short term but also the
long term. Further, any savings should
not be used to support growing operations in other states or in
lines of business outside of insurance. Moreover, we need to make sure
those savings do not come at the cost of consumers' accessibility to
needed health care – and to the doctors, hospitals, pharmacists and
other who provide that care. Finally this merger must not undercut the
social mission obligation that Highmark and IBC have – an obligation
that is part of their being excused from premium taxes and affords them
other statutory advantages under Pennsylvania law.
Again, thank you
Senator Specter and members of the Judiciary Committee for your interest
in this critical issue and I look forward to working with you on this
matter in the months ahead.
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