The unholy alliance between the Obama administration and the insurance industry just got messier. Attorney General Loretta Lynch and eleven state antitrust regulators filed a double lawsuit to block the pending $54 billion insurance merger between ANTHEM and CIGNA and the $37 billion acquisition of HUMANA by AETNA.
Back in 2009 when the healthcare reform debate was raging and the architects of ObamaCare were creating this legislative overhaul, an unwritten deal was made between the Obama administration and the insurance industry. Rather than eliminate the insurers entirely, as socialized medicine or single-payer would do, they agreed to let private insurance continue to sell their products.
In exchange, the insurance industry would agree to the many restrictions of ObamaCare and the upheaval of their industry. They would promote the virtues of the new law while keeping their mouths shut about its inherent weaknesses. After all, they were getting a new pool of people to insure and even if they lost money in the first few years there was a bailout provision in the law to make up for their losses.
Little did they realize that this Faustian pact would unravel as the Democratic party moved farther and farther left and a socialist named Sanders would nearly capture their nomination for president. Even without embracing socialism publically, the Obama administration is already reneging on the original bargain.
Mergers to Survive
As one who fights with the insurers every day to get paid in my medical practice, I have little sympathy for their plight. But I do detest hypocrisy and the Obama administration has plenty to spread around.
As the insurers try to consolidate to survive in this brutal healthcare insurance market made unprofitable by the mandates and restrictions of ObamaCare, the Obama administration now pretends they favor a free-market economy where competition in the insurance industry is necessary. Competition is usually a good thing for consumers, when there is a level playing field unfettered by government regulations, but that is not the current situation.
The provisions of ObamaCare have encouraged the consolidation of hospitals, doctors’ practices, and now insurance companies in order to save money through economies of scale, increased leverage in contract negotiations, and increased market share. But now the Obama administration seems to be determined to prevent insurers from succeeding.
The Federal Trade Commission, which oversees antitrust for providers, has been vainly attempting to block doctor and hospital mergers. In May, federal Judge John Jones rejected the FTC’s attempt to block the merger of Penn State Hershey Medical Center and Pinnaclehealth System in Pennsylvania.
Judge Jones rebuked the commission for ignoring “the health care world as it is” and remarked on the “no small irony that the same federal government under which the FTC operates has created a climate that virtually compels institutions to seek alliances such as the hospitals intend here.”
The Wall Street Journal editorial board lambasts this intervention by Lynch and wonders if she is acting on her own or in concert with the White House. They say, “In essence Justice and the FTC are punishing companies for obeying commands by other parts of the Obama Administration. But the real worry for trust busters shouldn’t be mergers but the lack of start-ups and entrepreneurs. In other industries except education, new entrants drive productivity and technological change. There has been no new net health-plan formation since 2008. None.”
But the real reason for this change of course by the Obama administration is that it feeds into their long-term goals. The Wall Street Journal editorial board makes this clear:
“Instead we’ll be treated to fewer and fewer politically protected incumbents, which means more bureaucracy. Less competition, less innovation and ultimately higher prices or more price controls. Despite their crocodile outrage, the merger boom is merely the next way station to where liberals want to go – single payer.”