On the surface, the approved merger between UnitedHealth Group and Sierra Health Services appears to be a lose-lose for everyone but the companies.
Political leaders, from the most liberal Democratic members of the Assembly to free-market Republican Jim Gibbons, don’t think it passes the smell test. Organized labor and doctors are even on the same side, with the American Medical Association and the Service Employees International Union worried.
As much as we like to bluster against the federal government out here in libertarian land, there are some things our state is still incapable of handling on its own.
And, with due respect to Insurance Commissioner Alice Molasky-Arman, neither the state’s laws nor its regulatory environment guarantee the proper oversight of a health care merger with this many potential consequences.
The rudderless federal Department of Justice is now charged with making sure the deal Molasky-Arman approved Monday meets antitrust muster. And it will hear from numerous opponents in addition to the AMA and SEIU.
Insurer No. 1 and Insurer No. 3 in Nevada may need to keep the Cristal on ice a bit longer.
I’m no attorney, but you don’t just create the most concentrated health insurance market in the nation without raising concerns about a monopoly. The AMA believes UnitedHealth will control 78 percent of the state’s HMO market and an unprecedented 95 percent of the Las Vegas HMO market.
If you don’t worry about that, you’re probably uninsured.
That kind of market dominance — dubbed monopsony — doesn’t portend the status quo here. Doctors and hospitals (particularly University Medical Center) are reeling from the health care squeeze that pushes costs up as reimbursements fall. And when that happens, the quality of health care tanks as well.
With that type of power, UnitedHealth could easily cut benefits or raise premiums. There’d be nowhere else in the state for many companies to go for coverage.
A monopolistic garbage company is worthy of some trash talk, but a merger of this magnitude will literally have life-and-death repercussions.
The problem is that despite all the usual bluster from health-care groups and politicians, Molasky-Arman’s blessing carries significant weight as the deal moves forward.
Assembly Speaker Barbara Buckley begged Molasky-Arman to impose meaningful concessions on the new company in exchange for approving the deal. And some might think the insurance commissioner did just that.
The big demands, vetted by the two big companies before she made them, essentially require local management of Sierra Health after the merger and prohibit the company from increasing premiums or passing down merger costs (like severance packages to now-useless managers) for 24 months.
If you recall, it was only recently that Nevada consumers were made to suffer for the Enron-duping of Nevada Power back in 2002. A portion of your sickening $300-plus August power bill goes to make Nevada Power “whole” from their past losses when Enron was manipulating the market.
Companies will find a way to pass the costs along.
Molasky-Arman could have done what California’s insurance commissioner did back in 2005 when UnitedHealth scooped up PacifiCare. That state wrangled a quarter-billion dollars in charity for preventive care, technology and education programs.
“While the insurance commissioner was able to require some concessions, I am not convinced that we have enough protections for the public at this time,” Gibbons said after the deal was approved.
Molasky-Arman was essentially required to approve the acquisition unless it would have resulted in at least one of seven specific negative things.
But that doesn’t mean her hands were tied from extracting some added protection, or, at the very least, some decent funding for preventive care and education.
In other recent health care mergers that resulted in antitrust lawsuits from Justice, the companies agreed to certain stipulations, not to mention funding for actual health care. Instead, Molasky-Arman asked UnitedHealth’s affiliates to take “specific actions” to reduce the number of residents here without insurance. Good luck.
And there was this doozy: “United and Sierra will continue, and build on, their charitable giving and philanthropic activities,” according to Molasky-Arman.
Remember, even the commissioner’s “key concessions,” as they’ve been dubbed, expire in two years.
It may take the bulk of that time for the two mega-companies to sort out the acquisition. And then what? All of the “key” protections are gone and 768,000 Nevadans will have to deal with whatever UnitedHealth decides to do.
The 2009 Legislature may pass legislation to prevent a similar rubber stamp in the future. But as is so often the case here, it would come too late for most Nevadans.
Erin Neff’s column runs Sunday, Tuesday and Thursday. She can be reached at (702) 387-2906, or by e-mail at email@example.com.ERIN NEFFMORE COLUMNS