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For Immediate
Release
9/5/07
Contact:
Joe Pittman
(724) 357-0151
"Blues" Merger Must be Part of Fall Legislative
Agenda
A column by State Senator Don
White
Following on the heels of a very strident clash over the state budget this
year, Governor Ed Rendell has laid out a rather extensive agenda of issues he
would like the General Assembly to consider this fall.
Many of the Governor's proposals deal with health care and I am heartened he
has expressed an interest in ensuring that Pennsylvanians have access to
affordable health insurance coverage.
However, it is distressing he did not include the passage of legislation
requiring state oversight of the pending merger of Highmark and Independence
Blue Cross (IBC) as part of his agenda. This merger is a major issue as it
involves the potential joining of the largest health care insurance company in
Western Pennsylvania with that of the largest insurer in Southeastern
Pennsylvania -- which could have a dramatic impact on both access to, and
affordability of, health care insurance for millions of our citizens.
In my view, any of the Governor's health care proposals are dwarfed when
compared to the enormity and far-reaching influence that a new mega-blue insurer
would have on health care in Pennsylvania for years to come. Therefore, we must
make sure the Commonwealth has the ability to thoroughly and appropriately
review this proposed merger.
All told the four Blues (Highmark, IBC, Capitol and Northeast) account for
more than 62 percent of Pennsylvania's health insurance market, according to
2005 statistics from the National Association of Insurance Commissioners. By
comparison, the two top private health insurers in Pennsylvania (Coventry Corp.
and Aetna) each have only about 6 percent of the market.
I don't think we are being alarmists when we raise concerns that this merger
would create a single, multi-billion dollar, mega-entity which could crush what
little competition remains in Pennsylvania's health care insurance market by
creating a near monopoly environment. There should be real concerns that costs
will skyrocket, quality of care will decrease and the workforce will be stuck
with the bill. If there is only one option for consumers to consider, and only
one entity to reimburse doctors and hospitals for services, increased costs and
decreased quality are real possibilities.
Highmark and IBC have contended the merger should be approved based on the
premise it will result in $1 billion in savings and according to Highmark,
"bring benefits to Pennsylvania citizens, physicians and other providers and the
communities in which we operate." If so, there must be iron clad assurances
that those savings and the win-win-win situation Highmark claims will result
from the merger will occur not only in the short-term, but the long-term as
well.
The Blues must also not lose sight of their primary mission – the reason why
they were created and why they receive special tax treatment. This merger must
not undercut the social mission obligation Highmark and IBC have – an obligation
that is part of their being excused from premium taxes and affords them other
advantages under Pennsylvania law.
Most importantly, we must ensure those savings do not come at the cost of
consumers' accessibility to essential health care – and to the doctors,
hospitals, pharmacists and others who provide that care. If such assurances
cannot be made, then I do not believe there is any reason to approve such a
merger. The Blues have stated this merger is in the best interests of
Pennsylvanians, so we need to make sure they stick to their word. This should
be an easy commitment for the new company to keep.
Unfortunately, under current law, the Commonwealth is limited in making sure
such assurances stick. This proposed merger, which involves multi-billions of
dollars and potentially impacts the lives and well-being of hundreds of
thousands of Pennsylvanians, is currently outside the purview of the state
Department of Insurance and General Assembly.
Today, the Insurance Department is only empowered to review proposed mergers
of for-profit health insurance providers. The Highmark-IBC deal, because it
involves two non-profit organizations, is not subject to the same scrutiny. But
we are working to change that. In fact, the Senate has approved oversight
legislation on three separate occasions – and as recently as June 30 – only to
see the bills sit idle in the House of Representatives because the Governor has
threatened a veto if it reaches his desk.
I introduced Senate Bill 550 in early March and am proud to say that bill was
unanimously passed by the Senate on March 28 and sent to the House, where it has
languished.
The House sent the Senate its own version of the regulatory oversight bill at
the end of April. Again, the Senate quickly responded and returned the bill for
House concurrence on May 22. That is the last we have heard of House Bill 112.
In an effort to prove that the third time is a charm, the Senate approved yet
another bill on June 30 to provide state oversight. House Bill 966 includes most
of the language previously approved by the Senate in Senate Bill 550 and House
Bill 112, along with several changes made in an effort to address what we
believe are the Administration's concerns about the legislation.
The Senate has shown on three occasions that we want this oversight and I
honestly believe a majority of the House membership wants to pass legislation
that provides the essential regulatory review of the proposed Highmark and IBC
merger. The oversight proposed in this legislation is indeed extraordinary – and
so is this proposed merger. The call for more oversight of this unprecedented
consolidation should not be a partisan issue.
Both Republicans and Democrats in the General Assembly realize this proposed
consolidation will, because of its size and impact on all Pennsylvanians, mean
more in terms of the quality and affordability of health insurance than any
piece of legislation we could enact, including those recommended by the
Governor. For the General Assembly not to have a meaningful voice in the review
of this consolidation would be irresponsible and a disservice to the
constituents we represent.
Beyond empowering the Department of Insurance to regulate the proposed
merger, our legislation calls for the creation of a Public Interest Review Board
comprised of representatives from the Auditor General's Office, the
Administration, the General Assembly, and policyholders or providers of the
'Blues.' This Board would present recommendations to the Department and provide
information that will enable citizens -- and those of us elected to represent
them -- to gain a better understanding of the far reaching consequences this
merger will have on every facet of Pennsylvania's health care system.
The legislation also calls for an accounting by the Blues of all amounts
spent on social mission and advertising. I believe it is in the public interest
to be able to transparently review social mission spending on an annual basis to
ensure the Blues are properly fulfilling their intended role in the
Commonwealth. Those insured by the Blues have a right to know what advertising
and community initiatives their premium dollars are subsidizing. .
Finally, the legislation would require assurances that the merger -- if it
occurs -- will result in sustained benefits for policyholders. In my mind, that
is the key question we must ask and have answered satisfactorily: 'Is this
merger in the best interests of everyday Pennsylvanians who are struggling to
maintain adequate health care coverage?'
I hope we can resolve our differences and enact the oversight provision this
fall. If the existing gap in the Department of Insurance'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 of any pending transactions involving the parent Blue plans for
anti-competitive effect. Just as significantly, the General Assembly must be
actively involved in reviewing the merger to ensure the citizens of this
Commonwealth are part of the process.
Many people don't realize that the non-profit Blues have invested hundreds of
millions of premium dollars in other for-profit subsidiaries across the state
and the nation. Fortunately, the Insurance Department does have oversight over
these for-profit subsidiaries and is accepting comments from the public
regarding their proposed merger which is part of the two non-profit parent
companies' merger proposal.
Details about how to find more information about the 17 subsidiaries, as well
as the applications and related materials filed by IBC and Highmark, are
available through my website:
senatordonwhite.com. I encourage you to read the filings and offer your
opinions on this issue. The Department of Insurance needs to hear from
Pennsylvanians who are as concerned as I am about the consequences this merger
could have on long-term cost and availability of health insurance.
In addition to enacting legislation to ensure appropriate review of the Blues
merger, I am committed to working with my colleagues during the fall session to
explore comprehensive reform measures that ensure employers and individuals have
more choices in the health insurance marketplace. Initiatives such as allowing
small business to "pool" resources to purchase health insurance, encourage
competition in the marketplace and small employer rating reforms are proposals
that must be advanced as part of the fall legislative session.
(State Senator Don White represents the 41st Senatorial District and
serves as Chairman of the Senate Banking and Insurance Committee.)
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