Price confirmed as HHS Secretary -AND- After Two Megadeals Blocked, Health Insurers Plot Next Moves

CAL/AAEM News Service at
Tue Feb 28 07:49:02 PST 2017



February 10, 2017


Price confirmed as HHS Secretary 



mpaign=financedaily> Modern Healthcare



By Virgil Dickson and Harris Meyer  


Newly confirmed HHS Secretary Tom Price likely will spend his first few days
focusing on efforts to stabilize the individual health insurance market as
Republicans work to repeal and replace the Affordable Care Act.


Following the pattern of strictly party-line votes on two previous nominees
- Attorney General-designate Sen. Jeff Sessions and Betsy DeVos for
Education secretary - the former congressman from Georgia was approved early
Friday on a 52-47 vote.


Two days earlier, the Senate had voted to move forward Price's nomination on
a 51-48 party line cloture vote.


Senate Democrats boycotted the nomination, prompting Republicans to suspend
the rules and vote on his nomination with no Democrats present.


Price has to figure out how to keep insurers in the market for 2018 to avoid
a meltdown that could leave 20 million people without coverage. Insurance
industry leaders say they need greater certainty about market rules before
they decide this spring whether to offer plans and how to price them.


Meanwhile, President Donald Trump is counting on the staunchly conservative
former orthopedic surgeon to lead the effort to draft an ACA replacement
plan, while also taking steps to dismantle the law through administrative


HHS already has a draft rule in the works that reportedly responds to
insurance industry requests for changes such as greater leeway to charge
older consumers higher premiums. Price may be torn between a Trump
administration executive order calling for rolling back ACA enforcement and
pressure from insurers to preserve rules such as the individual mandate that
keeps younger and healthier people in the market.


"Decisive action from HHS may be the only thing that can prevent a death
spiral in the individual market, and even then, uncertainty about repeal,
replace or repair may be too much for HHS to overcome," said Morgan
Tilleman, an associate lawyer with Foley & Lardner LLP in its heath
insurance practice.


Price will look for President Barack Obama administration regulations that
healthcare industry groups have deemed too burdensome and seek to alter or
eliminate those, said Dan Mendelson, president of Avalere, a consulting


Insurers and hospitals may welcome that. But consumer advocacy groups may


There also are questions about whether and how Price will promote Medicare's
continued shift from fee-for-service to value-based payment models. He has
sharply criticized the CMS Innovation Center, particularly its mandatory
bundled-payment programs for joint replacements and cardiac care.


At his confirmation hearing before the Senate Finance Committee last month,
Price said the Innovation Center had "gotten off track" and that its
mandatory programs were dictating to physicians how they must practice


Under Price, HHS will begin reviewing Medicaid waiver requests from Indiana,
Texas, Arizona and other GOP-led states seeking approval for conservative
policies that were rejected by the Obama administration, Mendelson said.
These states want to impose work-search requirements as a condition for
Medicaid eligibility, lock people out of coverage for nonpayment of
premiums, and set time limits on how long people can receive benefits.


It's expected that Price will look favorably upon such requests, which are
strongly opposed by patient advocacy groups.


Price is also expected to spearhead the conservative drive in Congress to
restructure Medicaid and Medicare, as he previously tried to do as a
legislator. Republican lawmakers in Texas, Wisconsin and Price's home state
of Georgia want to work with congressional Republicans on proposals to
convert Medicaid into a program of federal block grants or per-capita
grants, giving states much greater flexibility in how they use federal
Medicaid dollars. At the same time, however, states likely would receive
significantly less money over time.


Price will have a key partner in considering Medicaid waivers if and when
the Senate confirms Trump's nominee for CMS Administrator, Seema Verma.
Verma has helped such states as Indiana develop conservative Medicaid
expansion models. Her confirmation hearing has not yet been scheduled.


Verma worked with Vice President Mike Pence on Indiana's conservative
Medicaid expansion when he was governor there and consulted on similar
initiatives in Iowa, Kentucky, Maine, Ohio and Tennessee.


In addition, Price may look for ways to expand the role of private health
plans in Medicare, which would be consistent with his support for converting
Medicare into a defined-contribution, "premium support" program. He likely
will work closely with House Speaker Paul Ryan (R-Wis.) on a proposal to
restructure Medicare along those lines and increase the age of eligibility
to 67-though Senate Republicans remain leery about making big changes in the
politically popular senior health program.


Price argues that Medicare restructuring is necessary to protect the
financial future of the program. During his confirmation hearing, Price said
the Medicare trustees estimate that the Part A hospital trust fund will
become insolvent by 2028 unless changes are made.


The NAACP, the nation's oldest civil rights organization, had urged the
Senate not to confirm Price because of his Medicare views.


"Congressman Price is ... a proponent of radical and dangerous proposals to
cut billions from Medicare, converting it to a voucher program which would
lose value over time and will lead to less parity in coverage and increase
the financial burden of health care for low-income groups," the NAACP said
in a letter.




February 8, 2017


After Two Megadeals Blocked, Health Insurers Plot Next Moves 



locked-by-judge-as-anticompetitive> Bloomberg



by Zachary Tracer, David McLaughlin, and Andrew M Harris


After 18 months of courtship and court cases, two massive deals that would
have reshaped the U.S. health insurance industry have both been declared
dead, blocked by judges who said they'd do unacceptable harm to competition
in the industry.


Now, the companies are right back where they started. Anthem Inc.'s $48
billion deal to buy Cigna Corp. was blocked by a federal judge late
Wednesday, weeks after another judge halted Aetna Inc.'s bid for Humana Inc.
Anthem filed a notice of appeal on Thursday, and Aetna and Humana have said
they're still deciding whether to appeal.


The question now becomes what the companies will do with the large piles of
cash they allocated for the acquisitions, and whether they'll try anew at
fresh takeovers under a Trump administration, whose antitrust officials
could be more amenable to large consolidations. They could also opt for
something more conservative in the face of widespread uncertainty about the
future of the U.S. health system. But first, they may be back in court.


"Anthem is significantly disappointed by the decision," Chief Executive
Officer Joseph Swedish said in a statement. "If not overturned, the
consequences of the decision are far-reaching and will hurt American


Cigna, for its part, said it "intends to carefully review the opinion and
evaluate its options in accordance with the merger agreement." CEO David
Cordani has estimated that his company will have $7 billion to $14 billion
of deployable capital, with the high end including extra debt the company
could take on if it decided to make acquisitions.


"We have a track record of being very disciplined relative to our capital
priorities and not allowing surplus capital to sit around," Cordani said on
Jan. 11.


Fresh Deals?


Humana may be a target, once again. Cigna or Anthem may make a bid for the
Louisville, Kentucky-based company, which specializes in the fast-growing
business of selling private health plans for the elderly, said Ana Gupte, an
analyst at Leerink Partners. Cigna could also bid for WellCare Health Plans
Inc., she said.


Also likely are more conservative moves by the companies, like buying back
shares or investing in their own businesses, said Sarah James of Piper


"The four deal stocks have been hoarding cash for 18 months, and now that
the rulings have been announced, we believe the companies will look to
deploy the capital," she said in a note to clients. "The companies will most
likely favor share repurchases."


The ruling was largely expected, and moves in the companies' shares were
muted. Cigna gained 0.2 percent to $148.14 at the close in New York. Anthem
rose 1.9 percent to $161.68.


The Justice Department, along with the antitrust division that sued to block
the deals, could be remade under new Attorney General Jeff Sessions, who was
confirmed Wednesday. While antitrust officials under the Obama
administration aggressively blocked a number of megadeals, over time the
antitrust laws have ensured some consistency in enforcement between
Republican and Democratic administrations.


Holdover Case


The case is a holdover from the Obama administration, where the Justice
Department thwarted several mega-mergers, including Comcast Corp.'s
attempted takeover of Time Warner Cable Inc., Halliburton Co.'s deal for
Baker Hughes Inc. and AT&T Inc.'s bid for T-Mobile US Inc.


"If health-insurance companies are thinking of merging and they don't really
compete with each other then these decisions shouldn't discourage them,"
said Martin Gaynor, a professor of economics and health policy at Carnegie
Mellon University. Companies with serious overlaps in business would still
face obstacles, he said.


There's also the risk that Republicans will remake large parts of the U.S.
health-care system as part of their plan to repeal and replace the
Affordable Care Act. Insurance executives may wait to see which parts of the
industry the new administration and Congress favor before writing checks.
The ACA, which expanded the market for Medicaid health plans and for
coverage sold to individuals, hasn't been a big driver of growth for any of
the firms. Still, its demise could cut off a source of growth at a time when
they're looking for ways to expand.


'Sit Back'


"We expect potential buyers to take their time," Thomas Carroll, an analyst
at Stifel Nicolaus, said in a research note. "In our view, all potential
buyers will sit back, see how the new administration reshapes U.S. health
care, and digest the deal commentary of the last year and a half."


Anthem has also said it would pursue deals and buybacks as its "Plan B" if
the Cigna transaction didn't go through. CEO Joseph Swedish has said he
might attempt to expand in the Medicare Advantage market through
acquisitions, for example.


The 18-month effort to get the transaction done was marked by discord
between Anthem and Cigna. Last year, the companies accused each other of
violating the merger agreement, and the government said in court that
disputes among executives had undercut the rationale for the deal.


The hostility could continue. With the deal defeated, Anthem owes Cigna a
$1.85 billion breakup fee under the terms of the agreement. Anthem wouldn't
have to pay the breakup fee if it could prove that Cigna committed a
"willful breach" of the merger agreement.


Company Disputes


The disputes, which spilled into court, harmed the deal's chances, said U.S.
District Judge Amy Berman Jackson. She called the hostility the "elephant in
the courtroom."


"Cigna officials provided compelling testimony undermining the projections
of future savings, and the disagreement runs so deep that Cigna
cross-examined the defendants' own expert," she wrote. "Anthem urges the
court to look away, and it attempts to minimize the merging parties'
differences as a 'side issue,' a mere 'rift between the CEOs.' But the court
cannot properly ignore the remarkable circumstances that have unfolded both
before and during the trial."


The Anthem-Cigna case turned on the market for health plans sold to
employers. In her ruling, Jackson looked at its likely effect on the sale of
health insurance to "national accounts" -- customers with more than 5,000
employees, usually spread over at least two states -- within the 14 states
where Anthem operates as the Blue Cross Blue Shield licensee.


"Eliminating this competition from the marketplace would diminish the
opportunity for the firms' ideas to be tested and refined, when this is just
the sort of innovation the antitrust rules are supposed to foster," Jackson
said in her 12-page order. Her accompanying opinion fully detailing her
reasons for ruling against the deal was filed under seal.


Acting Assistant Attorney General Brent Snyder of the Justice Department's
antitrust division called the ruling "a victory for American consumers."


"This merger would have stifled competition, harming consumers by increasing
their health insurance premiums and slowing innovation aimed at lowering the
costs of health care," Snyder said in a statement.




Jeff Wells
Deputy Editor, CAL/AAEM News Service


Brian Potts MD, MBA
Managing Editor, CAL/AAEM News Service

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