Politicians, economists and journalists debate the reasons for, and the impact of, proposed sale of Humana to Aetna

By Al Cross
Kentucky Health News

The purchase of Louisville-based Humana Inc. by fellow health-insurance giant Aetna Inc. for $37 billion still needs approval from federal anti-trust officials, partly because of the possibility that the merger will reduce competition and increase premiums.

Some other public officials, the elected kind, wasted no time weighing in on the sale. And, since it deals with health insurance, it may come as no surprise that their statements followed partisan lines, reflecting their views of the Patient Protection and Affordable Care Act.

Wall Street Journal graphic

Even before the deal was announced, Senate Majority Leader Mitch McConnell, R-Ky., said Thursday, "You’ve seen the rumors about Humana being gobbled up by someone who’s even bigger. This kind of government takeover of the private health-insurance market – think of it this way: what Obamacare has basically done is taken the private health insurance market and turned it almost into a regulated utility."

In a press release Friday, McConnell said, "This morning’s announcement, as I predicted during the debate five years ago, is the inevitable result of Obamacare’s push toward consolidation as doctors, hospitals, and insurers merge in response to an ever-growing government."

U.S. Rep. John Yarmuth, D-Louisville, said consolidation in the health-care industry has been going on for decades, "and it is appropriate for the Department of Justice to scrutinize the pending merger to ensure it does not reduce competition, and therefore, consumers' options."

Louisville Mayor Greg Fischer, a Democrat who ran in the primary for McConnell's seat in 2008, said he was "a little surprised by the political nature" of the senator's statement. Fischer and Democratic Gov. Steve Beshear were generally upbeat about the merger. "I am cautiously optimistic that this merger will be a net positive for Louisville and the commonwealth," Beshear said.

Humana has 12,500 employees and 1,500 contractors in the Louisville area. Fischer said, "I think it's very fair to speculate that it will lead to more jobs," and Bruce Broussard, president and CEO of Humana, said, "I think Louisville will be a net beneficiary as a result of this transaction."

However, University of Louisville finance professor David Dubofsky "said it may not turn out so well for the Louisville and Humana employees after all," The Courier-Journal reports, quoting him: "When two companies in the same industry merge, and the acquirer is paying a premium, you have to generate cost savings," partly by reducing employment among workers with similar jobs.

There is a connection between the merger of health-care providers, such as the creation of Kentucky One Health by several hospital groups, and the merger of insurance companies. "Many experts have said that the provider consolidation can drive higher rates—and that more-powerful insurers might have a better chance of countering them and striking pacts for new forms of payment that incentivize efficiency," Anna Wilde Matthews and Christopher Weaver write for The Wall Street Journal.

But they also note, "Research suggests that having fewer insurers leads to higher premiums, said Leemore S. Dafny, a former Federal Trade Commission official who is a professor at Northwestern University’s Kellogg School of Management.

Aetna with Humana would dominate the Medicare Advantage market in some states, with 90 percent of it in Kansas, notes Drew Altman, president of the Kaiser Family Foundation. "Of course, regulators could insist that companies take steps to maintain more competitive markets."

The Journal reports that it analyzed a Medicare database and found, "An Aetna-Humana tie-up would increase by about 180 the number of U.S. counties where at least 75 percent of customers for Medicare Advantage plans are in the hands of a single insurer." Most of those counties are in the South and Midwest. Using another federal database, it found that "In eight states, an Aetna-Humana merger would remove a competitor from the exchanges where individuals can buy coverage under the Affordable Care Act."

The prospect that jobs might be lost in Louisville doesn't mean that the ACA has put financial pressure on Aetna or Humana, Dan Diamond writes for Forbes magazine: "There’s limited evidence that the biggest players are struggling. While the ACA capped insurers’ ability to take profits, industry analysts have been fairly bullish on the sector. . . . And as I wrote earlier this week, the ACA appears to have only helped major insurers, by driving millions of new customers into the market. Aetna and Humana have seen their stock valuations triple in the past five years, since the ACA was signed into law, and the other three major insurers also have seen huge gains."

Diamond also isn't buying the argument, advanced by Aetna officials, that the combined company will be more efficient than the separate ones. "Aetna and Humana already are giant, scaled entities," he notes. "And economists aren’t buying the claim that insurer consolidation will lead to lower costs." As Judy Woodruff noted on "PBS Newshour" Friday, the deal would give the combined company more leverage to negotiate payments to health-care providers.

Health insurers' shares of total Medicare Advantage business
(Kaiser Family Foundation chart)

Diamond says the best case for Aetna's purchase is that it gets the company deeply into the Medicare Advantage business, without having to expend "a great deal of work and time," as Michael Bernstein, a partner at Baird Capital partner who focuses on health care, told Bloomberg News last month. Aetna has only 7 percent of that business, Humana 19 percent -- and about 65 percent of its revenues came from Medicare Advantage plans in 2014, Altman notes. The combined company is expected to get 56 percent of its revenue from government programs.

Diamond says economists see one more possible reason for the merger: "Amid health care’s merger mania, insurers are feeling psychological pressure to make deals of their own." And that does take us back to Obamacare. But the impact on Kentucky has yet to be seen, and so do the reasons.

Ky.'s pro-Obamacare policies led to more enrollment and support for it, but many poor are still uninsured and under-informed

Update: This story was updated to reflect the study's results for those who said they were hurt  by and not directly impacted by the ACA. 

State policy appears to have a major impact on poor people's thinking about the Patient Protection and Affordable Care Act, as well as how they describe their experience with it, according to a Harvard University study published in the journal Health Affairs.

The study surveyed nearly 3,000 low-income residents in three Southern states that had varying approaches to the ACA and its implementation: "Kentucky, which expanded Medicaid, created a successful state marketplace, and supported outreach efforts; Arkansas, which enacted the private option and a federal-state partnership marketplace, but with legislative limitations on outreach; and Texas, which did not expand Medicaid and passed restrictions on navigators" who help people with the federal and state marketplaces.

The survey found that Kentucky, which has enrolled more than 500,000 people in Medicaid and another 109,000 in private health plans through the Kynect health-insurance exchange, had the highest success in application rates, successful enrollments and positive experiences with the ACA, followed by Arkansas and then Texas.

"This corresponds to the general pattern of state-level engagement and support for the ACA coverage expansions in these three states," the researchers write.

The study also found that limited awareness and poor information continue to be two of the greatest barriers to the ACA. Even in Kentucky, where awareness was the highest, only half of the poor people surveyed said they had heard "some" or "a lot" about the ACA's coverage options. About 10 percent of Kentuckians remain without health insurance.

Another barrier to applying for coverage was the perception that it would cost too much, but for those with incomes below 138 percent of poverty in states that have expanded Medicaid, coverage is available without having to pay a premium.

"This adds to previous evidence that information gaps about the law remain a major challenge, particularly among low-income populations who likely have the most to gain from the coverage expansions," the researchers write.

The study also found that application assistance from navigators and others was the strongest predictor of enrollment, increasing enrollment to 93.1 percent from 84.9 percent. Application assistance was most common in Kentucky (46.2 percent) and least common in Texas (31.9 percent). Navigators help consumers choose health-insurance plans to meet their needs and assist them with the application process.

Kentucky reported an overall better application experience than the other two states in the study, and had a significantly higher enrollment rate (92.4 percent) than Arkansas (87 percent) and Texas (84.8 percent).

The study found that advertising about the law didn't seem to affect whether people applied for coverage or enrolled in a plan. However, ads were strongly associated with perceptions of the law.

About 20 percent of respondents said they had read or heard more negative ads and approximately 12 percent recalled more positive ads, and two-thirds said ads were about equal. (Negative ads were most frequently reported in Arkansas, where Obamacare was an issue in a U.S. Senate race last year.)

Twice as many respondents felt that the ACA had helped them as hurt them, although the majority reported no direct impact. In Kentucky, 40 percent said it had helped them, 12 percent said it had hurt them and 48 percent said it had not impacted them directly;  In Arkansas, 30 percent said it had helped them, 17 percent said it had hurt them and 54 percent said it had not impacted them directly; and in Texas, 21 percent said it had helped them, 14 percent said it had hurt them and 66 percent said it had not directly impacted them.

"Nonetheless, 48 to 66 percent of low-income adults in all three states felt the law had not directly impacted them in 2014," the researchers wrote, "which suggests that the ACA has not yet reached many who might benefit from it."

Pulaski County hits the mark with a community program to get kids up and moving; a great model for other communities to follow

Communities wondering what they could start that is fun, and will also improve the health of local families, might consider hosting something like "The Longest Day of Play," which Pulaski County has done for the last five years.

The Longest Day of Play at SomerSplash Waterpark
(Photo by Katie Pratt, UK Agricultural Communications)

The Longest Day of Play is a day, typically around the longest day of the year, on which SomerSplash Waterpark invites families from across the region for a day of physical activity and healthy living, Katie Pratt reports for the University of Kentucky. For those under 18, the event includes free admission, a healthy lunch, a book to read for the summer and sunscreen.

“A lot of times the people who are here today wouldn’t otherwise get to come, so it’s an opportunity for us to give back to the community,” Stephen Sims, manager of the waterpark, told Pratt. “It’s a way to get kids out and let them be active and not just simply stay at the house all summer long.”

The event is hosted by Pulaski County schools, UK's Cooperative Extension Service, the Lake Cumberland Health District Department, Eastern Kentucky Personal Responsibility in a Desirable Environment (PRIDE), and the city of Somerset.

“We have a Working on Wellness group in the community, and we wanted an event to give children nutrition, physical activity and to help our new waterpark grow," Edith Lovett, Pulaski County family and consumer sciences extension agent, told Pratt.

While Pulaski County has an awesome venue for the event, most communities have something special to offer -- parks, swimming pools, bike trails, school running tracks -- that could bring families together for a day of physical activity, fun and nutritious food.

Centers for Disease Control working to find ways to prevent traumatic brain injury; affects one in five Kentucky households

The federal Centers for Disease Control and Prevention is using a public-health approach to find strategies to prevent traumatic brain injuries and reduce the physical, psychological, economic and social impacts they cause.

Image: brainline.org

Traumatic brain injuries are those that happen because of a blow or jolt to the head, like a fall or a motor vehicle accident. It contributes to 30 percent of all injury deaths in the U.S., killing 138 people every day, according to the CDC.

Nationwide, the most common cause of brain injury is falls, but in Kentucky, most brain injuries and brain-injury-related deaths are caused by traffic accidents. About 5 percent of Kentucky's population has a brain injury, which is double the nation-wide rate, affecting one if five Kentucky households,  according to the Brain Injury Alliance of Kentucky.

Survivors of serious brain injuries have a range of disabilities, from memory issues, personality changes to debilitating physical disabilities, having a lasting effect on families and communities.

In partnership with the traumatic brain injury and rehabilitation communities, the CDC, using research, is working to meet these goals and results of this research can be found in a special issue of the Journal of Head Trauma Rehabilitation.

One article looks at the problems of unemployment after traumatic brain injury, with data showing that 60 percent of patients who received inpatient rehabilitation for TBI are still unemployed after two years of discharge -- and 35 percent of those who were employed two years after injury were employed only part-time. In Kentucky, 45 percent of those with brain injury reported a loss of employment or educational opportunity because of their injury.

Another article focuses on motorcycle crashes as a cause of TBI and says, "People injured in motorcycle crashes use more health-care resources and are three times more likely to die in the emergency department, compared to those with other causes of TBI." Kentucky had 6,552 hospital visits in 2013 for TBI caused by motor vehicle crash and of these 419 were motorcycle related, according to the Brain Injury Alliance. Kentucky no longer has a law requiring motorcyclists to wear helmets.

Other articles look at the high impact of sports- and recreation-related TBIs, reporting that "About 7 percent of all emergency department visits for sports- and recreation-related injuries are TBIs, with at least 3.4 million sports- and recreation-related TBI emergency department visits occurring over a 12-year study period." Kentucky hospitals had 2,600 TBIs in 2013 related to sports and recreation injury, according to the alliance.

Medicaid managed-care firms get new contracts with new rules aimed at resolving health-care providers' issues with program

Kentucky has signed new contracts with five managed-care firms that will manage Medicaid coverage for more than 1.1 million Kentuckians. Contracts were awarded to Anthem, Coventry Cares, Humana, Passport and Wellcare.

Kentucky changed Medicaid to managed care from a traditional fee-for-service model in 2011 to save money, and officials say it has worked. Health-care providers remain unhappy about denial and delay of claims by the managed-care organizations (MCOs).

“Statistics confirm that moving to a managed-care model has saved Kentucky taxpayers more than $1.3 billion in state and federal funds while simultaneously improving the delivery of health-care services to our Medicaid population," Health Secretary Audrey Haynes said in a news release.

At the same time, managed care has been a good deal for the companies, except Humana. "Last year, [they] cleared more than $500 million in income above expenses, according to statements companies must file with the Kentucky Department of Insurance," Debby Yetter reports for The Courier-Journal. "Some of the profits ranged from 7 percent to nearly 18 percent in 2014," but the new contracts limit that to about 6 percent.

They also require 82 to 87 percent of the payments to the MCOs to be spent on direct services to its members. The payments are per-person fees, based on the number of people whose care is being managed.

Haynes said the contract improvements "should please consumers, advocates and our health care providers" and "will translate into more options and improved services from our managed care companies."

The new contracts also address many of the issues about which hospitals and other providers have been unhappy, such as slow and reduced payments, complicated paperwork and other procedural differences among the companies.

The new contracts require a standardized contract and standardized forms for prior-authorization requests, grievances, appeals and claims.

Two passionately debated bills in the recent legislative session challenged some of the practices of the current MCOs: one seeking an appeals process for denial of payment and the other removing a cap of "triage fees" for emergency room services that MCOs later deem not to be emergencies.

Both issues were addressed in the new contracts. Now, MCOs must make sure they are using appropriate medical specialist to determine "medical necessity," initially and in any review process, and the cabinet will be responsible for reviewing denials of "medical necessity" appeals and denials of payment for emergency-room use.

Sen. Ralph Alvarado, R-Winchester, co-chair of the joint House-Senate Medicaid Oversight Committee, told Yetter that "he hopes the new contracts will clear up the problems" and he also hopes "the state succeeds in controlling profits of the managed-care companies, calling it an outrage that some companies are reaping millions off the program while denying care or delaying payment."

The new contracts also include incentives for MCOs and Medicaid members to decrease use of emergency rooms, and encourage the expansion of behavioral health services.

They offer incentives to to MCOs to continue to improve health outcomes for their members, and spells out new, stringent standards for companies that don't comply with their contracts.

The contracts are for one year beginning July 1, with the option of four annual renewals.