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For Immediate
Release
1/31/08
Contact:
Joe Pittman
(717) 787-8724
Capital Blue Cross: Merger
Would End Most Competition
CEO
questions whether $1 billion payment is worth "mortgage"
The proposed merger of Highmark and Independence Blue
Cross (IBC) would effectively end health care insurance
competition in most of Pennsylvania, Capital Blue Cross CEO
and President Anita Smith told the Senate Banking and
Insurance Committee yesterday (January 30).
Speaking at a public hearing on the merger, Smith asked
committee members to consider whether the $1 billion
"one-time benefit" to the Commonwealth would be worth
forever losing the benefits of statewide competition.
The committee also heard testimony from James R. Buckley,
President of the Delaware Valley Health Care Coalition (DVHCC),
who urged the Commonwealth to consider enacting price
control legislation to promote competition in the health
insurance marketplace.
"Throughout this series of hearings, we have tried to
remain objective and continue to welcome the opinions and
viewpoints of any and all interested parties," said Banking
and Insurance Committee Chairman Senator Don White (R-41st).
"We appreciated hearing the thoughts of Mrs. Smith and Mr.
Buckley on the proposed merger and how they envision its
affect on the health care market. Maintaining a competitive
health care insurance marketplace has been my main concern
throughout the committee’s consideration of this merger."
The public hearing opened with a presentation by Smith,
who said the Highmark-IBC merger followed expiration of a
10-year non-competition agreement between the two companies.
"Great attention has been paid to the lure of this
transaction – a purported $1 billion, one time economic
benefit to the Commonwealth. I know this committee will
carefully review that figure," Smith said. "But it should
carefully review what it would give up for that money.
Pennsylvania's health insurance market will account for more
than $500 billion over the next decade alone. So, we
respectfully pose the question again – is a one-time payment
worth mortgaging the competitive future of this enormous and
vital market? We believe the answer is no.
"But what is beyond debate is this: to approve this
merger without conditions would forever close the door on a
competitive statewide health insurance marketplace," Smith
continued. "Make no mistake, this merger is the
Commonwealth’s final opportunity. We either nurture vibrant
statewide competition, or we forever preclude it."
Buckley said the DVHCC, a group of 92 Union Multi
Employer Health and Welfare Funds representing more than
400,000 participants, spent about $1.5 billion for medical
care during 2007.
"Competition in the health care system occurs at the
wrong level, over the wrong things, in the wrong geographic
markets, and at the wrong time," Buckley said, in testimony
to the committee. "Competition has actually been all but
eliminated just where and when it is most important,
particularly in this Commonwealth where the status quo
favors a 'closed system.' Legislation that promotes a
system of equitable medical charges and payments for all
would promote competition and result in more economical and
efficient medical care."
Buckley said that in the current environment, where
patients' treatments are determined by the networks they
participate in, network providers are all but guaranteed the
business - no matter what the quality of services
delivered. He suggested that Pennsylvania develop a
reimbursement system similar to that of Workers'
Compensation programs, which fixes reimbursements based on a
percentage or multiple of the regional Medicare allowance
for the procedure/service in question.
"Instead of allowing the major health insurers to use
their oligopoly power to receive preferential pricing and
profits, healthcare providers should be able to charge
reasonable prices to all healthcare consumers," Buckley
said. "The present system unfortunately provides
unjustified discounts to the largest insurers and
unreasonable mark-ups to the smallest healthcare payers. In
the process, it rewards the majors with profitable, yet
unjustifiable discounts, which all the other purchasers of
health services subsidize."
Frank Sirianni, president of the Pennsylvania State
Building and Construction Trades Council, raised concerns
about the impact the proposed merger could have on
competition in Pennsylvania and the use of "surplus" money
for government programs.
"I am deeply concerned about the lack of competition in
the state. Reducing the number of providers reduces
competition which leads to higher prices," Sirianni said.
"The consumer protections are very important in this
merger. The actions taken by this committee and by the
Senate to have oversight on this merger are well founded and
we support that. We oppose the use of the Blues surplus for
the Governor's CAP (Cover All Pennsylvanians) program. We
feel those are premiums that were paid by our members, and
if there is a surplus, it should be used for lowering
premiums or creating better benefits for our members. We
need to know who in the state is protecting the consumers. I
believe, Mr. Chairman, your committee is trying to do just
that."
Additional Information:
Health Care
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