UNITED STATES OF AMERICA v. UNITEDHEALTH GROUP INCORPORATED et al

Filing 11

RESPONSE TO PUBLIC COMMENTS in Antitrust Case by UNITED STATES OF AMERICA. (Attachments: # 1 Comment, # 2 AMA Attachment A, # 3 AMA Attachment B, # 4 AMA Attachment C, # 5 Velazquez Comment, # 6 Velazquez Attachment A, # 7 SEIU Comment, # 8 Giunchigliani Comment)(Mucchetti, Peter)

May 15, 2008
VIA E-MAIL
The Honorable Thomas O. Barnett
Assistant Attorney General for Antitrust
c/o Joshua H. Soven
Chief, Litigation I Section
U.S. Department of Justice
Antitrust Division
1401 H Street, N.W.
Suite 4000
Washington, DC 20530
RE: Tunney Act Comments, United States v. UnitedHealth Group Incorporated, Civil
Case No. 08-0322
Dear Assistant Attorney General Barnett:
These comments are submitted pursuant to the Tunney Act1 regarding the Proposed Final
Judgment (PFJ) filed by the U.S. Department of Justice (DOJ) with the U.S. District
Court for the District of Columbia in United States v. UnitedHealth Group Incorporated,
Civil Case No. 08-0322.
The Tunney Act requires the Court to determine whether the PFJ is in the public interest.2
In making this determination, the Court must carefully consider the fact that entry of the
PFJ will profoundly reduce competition in the health care markets of Clark County and
the State of Nevada, and pose significant risks to consumers, physicians and small
businesses. The public benefit arising from entry of the PFJ is not readily apparent.
While the Department of Justice (DOJ) took steps to protect senior citizens by requiring
the divestiture of Medicare Advantage related assets, I am concerned the PFJ does not
adequately protect the rest of the public, including small businesses, healthcare providers
and patients.

1
2

15 U.S.C. §§ 16(b)-(h).
15 U.S.C. § 16(e).

1

On October 25, 2007, the Committee on Small Business held a hearing entitled Health
Insurer Consolidation—The Impact on Small Business. The Committee heard from
witnesses representing small businesses, the medical community and consumers who
expressed concern regarding the growing trend of consolidation in the health insurance
industry.
Witnesses made the following comments at the hearing:
“. . . consolidation has left physicians with little leverage against unfair contract terms
that deal with patient care and little control over their own employees rising health
insurance premiums.”3
“The lack of competition among health insurers absolutely affects my insurance cost, as
well as the quality and scope of coverage. Our state’s [Illinois] non-competitive health
care insurance environment, due to the monopoly of one or two carriers, places all the
leverage in the hands of the insurers. I can’t vote with my feet and dollars if I have no
alternatives from which to select.”4
“Consolidation of health insurance plans have [sic] created a profound imbalance that
hurts the ability of family physicians to negotiate contracts. This is harmful to our
practices, but also means that many of our patients cannot find the primary care
physicians who accept their insurance.”5
“Health insurance consolidation has in part created a take it or leave it market for small
businesses. Reduced competition through consolidations both of insurance carriers and
health insurance carrier provider networks has led to increased pricing (and) fewer
choices for small businesses and their employees.”6

The hearing record is included as part of this comment.
Access to health insurance is an area of key concern to small businesses. The rising cost
of health care is regularly cited by small firms as one of their biggest worries. Small
businesses need to have choices in the health insurance marketplace. In addition,
mergers should not be permitted that enable a health insurer to reduce compensation to
physicians below competitive rates. If the playing field for health care providers is not
level, quality of care declines and patients ultimately suffer.

3

Statement of Dr. William G. Plested, III, Immediate Past President, American Medical Assn.
Statement of Robert Hughes, President of the National Association for the Self-Employed (quoting a
member).
5
Statement of Dr. James D. King, President, American Academy of Physicians.
6
Statement of James R. Office, General Counsel, Victory Wholesale Grocers.
4

2

The health insurance marketplace has become increasingly consolidated in recent years.
Consolidation has left small businesses with fewer choices and physicians with
diminished leverage to negotiate with plans. Econometric evidence shows that in the
managed care field, an increase in the number of competitors is associated with lower
health plan costs and premiums; conversely, a decrease in the number of competitors is
associated with higher health plan costs and premiums.7 In the majority of metropolitan
areas, a single insurer now dominates the marketplace. If individuals and small
businesses cannot get coverage through the dominant insurer in these areas, they may not
be able to find alternatives.
Because mergers of health insurers affect access to health care and influence the quality
of medical services to consumers, they command great scrutiny.
To maintain competition in the marketplace, the proposed acquisition of Sierra Health
Services, Inc. (“Sierra”) by UnitedHealth Group Incorporated (“United”) requires the
divestiture of more assets than merely those related to United’s Medicare Advantage
business in the Las Vegas area. Sierra is United’s largest rival in the state of Nevada.
The level of concentration posed by this merger is tremendous. A combined UnitedSierra would have a nearly 80 percent share of the commercial HMO market in Nevada
and almost a 94 percent share of the commercial HMO market in Clark County.
DOJ notes that “United and Sierra together account for approximately 94 percent of the
total enrollment in Medicare Advantage plans in the Las Vegas area,” and that the
“acquisition is likely to reduce competition substantially in the sale of Medicare
Advantage plans in the Las Vegas area in violation of Section 7 of the Clayton Act.”8
Similar effects on competition will likely arise both in the commercial HMO market,
which will see virtually the same levels of concentration as the Medicare Advantage
market, and the market for the purchase of physician services. The PFJ fails to address
this diminishment of competition in these markets in Las Vegas and the State of Nevada.
It is critical that the Court consider the following factors in evaluating the PFJ:

7

Examining Health Care Mergers in Pennsylvania: Hearing Before the Senate Judiciary Committee, 110th
Congress (April 9, 2007) Statement of Lawton Burns, Professor, Wharton School of Business.
8
73 Federal Register 12763 (March 10, 2008).

3

The PFJ Could Enhance United’s Market Power and Hurt Small Businesses
United will go from having a 12 percent share of the HMO market in the state of Nevada
to an 80 percent share. In Clark County, the market share will surge from 14 percent to
94 percent. By allowing the two largest competitors in the state to merge, small
businesses will face severely diminished options in health insurance plans. The insurance
marketplace in Nevada and Clark County is already highly concentrated—which
necessitates an even higher level of scrutiny. With such a dominant market position, a
combined United-Sierra could attain market power to raise prices to small businesses
above competitive levels. Small businesses will have few alternatives to a combined
United-Sierra and as a consequence, will be stuck with higher premium costs. If costs
rise above competitive levels more small firms will stop providing coverage to
employees, increasing the number of Nevada’s uninsured.
Additionally, it is important to contemplate that existing barriers to entry in the HMO
market are extremely high. It is unlikely that a combined United-Sierra will face any new
competitors in Nevada in the near future.
The PFJ Could Enhance United’s Monopsony Power and Hurt Physicians and
Patients
With such an overwhelming market share, the combined United-Sierra could reduce
compensation for providers to the point where it is below competitive levels. Lower
service, poorer quality and reduced access to health care could result. Physicians and
other providers may not have sufficient alternatives to allow them to circumvent the
compensation decreases of a combined United-Sierra. The costs for physicians to switch
to other health care insurers are substantial as physician time is valuable and it can be
difficult for a physician to quickly replace lost patients. With such a dominant market
share and high switching costs, physicians may find that, when faced with lower
reimbursement, they are unable to switch from a combined United-Sierra to another
insurer. If this is the case, a combined United-Sierra could exercise market power against
health care providers.
I appreciate consideration of the above mentioned issues. I am concerned that the PFJ
does not adequately preserve competition in the health insurance marketplace for small
businesses, physicians and consumers.
Sincerely,

Nydia M. Velázquez
Chairwoman

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