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Consumer groups fear merger of Aetna and WellPoint could bode ill for patients

Consumer advocates are predictably cautious or even downright fearful about the impact on patients should HMO giants Aetna U.S. Healthcare and WellPoint Health Networks Inc. merge.

What can you do?

When any health plan intends to acquire another, state insurance regulators must approve the deal. Their priority is protecting the public interest. But you can also take steps to safeguard your interests if your health plan is on the auction block, says Robert Hunter, insurance director of the Consumer Federation of America. Here's his advice:

  • Attend public hearings held by regulators in affected states
  • Ask if your benefits will change
  • Ask about premiums
  • Ask about changes in your network of doctors and hospitals
  • Ask if you can use "transition care" to continue to see your doctor or specialist, especially if you have a chronic or serious illness.

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Both WellPoint and Aetna confirmed late on March 1 that they are in talks about an acquisition — although the two had tried in vain to keep it hush-hush.

On Feb. 24, California-based WellPoint sent an unsolicited letter to Aetna expressing its interest in an acquisition. WellPoint's bid of $10.4 billion was made in conjunction with the insurance unit of ING Group, a Dutch investment bank and insurer. The possible resulting scenario has WellPoint scooping up the troubled Aetna Inc.'s health care division and ING taking over its financial services businesses.

News of the possible acquisition of Aetna immediately raised red flags at consumer groups.

The California-based Foundation for Taxpayer and Consumer Rights (FTCR), spearheaded by outspoken HMO critic Jamie Court, says a merger would put too much control into too few hands, sending health plan prices up and quality down. The group is calling upon the federal Justice Department to stop the potential merger on antitrust grounds.

"Patients, nurses, doctors, and hospitals would have even less ability to vote with their feet when they dislike the quality of care at their managed care company than they do now," contends Court, noting that the bulk of America's HMO market would be controlled by just six insurers. "Already, Aetna controls the health coverage of one of every 11 insured Americans."

And Robert Hunter, director of insurance for the Consumer Federation of America in Washington, D.C., says a merger could make it more difficult on people who don't get health coverage through work and instead must buy individual plans on their own. "People who tend to be harder to insure would find it even harder to get insurance as competition goes down," he says. In many states, insurers that sell individual health plans can "medically underwrite" people, which means they can reject applicants with current or past medical problems or charge them higher premiums.

But Hunter tempers those concerns by pointing out that, in the long term, consolidation could eliminate waste and reduce overhead, which, in turn, could mean a reduction in premiums and even improved service. And some consumers, he says, particularly those in areas where WellPoint and Aetna have little penetration, may see no changes at all.

The mouse that roared

The possibility of anyone buying Aetna, which has grown into a powerful global force from its headquarters in Hartford, Conn. — where it is fondly known as "Mother Aetna" — was surprising enough. It was especially stunning, though, since WellPoint is much smaller, ranked as the No. 5 health insurer in the nation with 7.3 million customers, compared to No. 1 Aetna U.S. Healthcare, which has 21 million customers. There was some question about just how serious such a bid could be.

But WellPoint has been aggressive in recent months about buying up other health plans — albeit ones smaller than itself.

On March 1, it completed the acquisition of Rush Prudential Health Plans of Illinois. WellPoint also has a $500 million deal pending to buy Blue Cross and Blue Shield of Georgia. But with antitrust issues likely to percolate with an Aetna merger — as they did when Aetna bought Prudential — that acquisition could be quashed.

A giant stumbles

And Aetna has been shaken lately by sagging finances and investor displeasure with management. Some in the health insurance industry say with the venerable giant weakened, it could be ripe for an acquisition. And its own chief executive has not helped matters.

Huber's hardball tactics have turned Aetna into the HMO that doctors love to hate.

The revelation of WellPoint's interest came before the seat of Richard Huber had even grown cold since his sudden resignation as Aetna's CEO on Feb. 25. But just as Jamie Court has publicly hammered HMOs, Huber has been a vocal, sometimes brash, critic of doctors and health care spending.

His controversial remarks in interviews with the press, combined with falling stock prices, didn't sit well with Aetna investors, who fretted that under his helm the company had acquired too many health plans too quickly, becoming saddled with debt. In addition, in January, Aetna was jolted by a jury award of $116 million in punitive damages in the death of a cancer patient; it was the largest such award against an HMO. Investors quietly groused about Huber, and then pressured him to leave. He was replaced by William Donaldson, who has been a member of Aetna's board of directors since 1977.

Huber's comments and his hardball tactics also have turned Aetna into the HMO that doctors love to hate, and he apparently knew it. Once, at a retreat on health care issues teeming with doctors, Huber joked that he'd have to take a food tester before he himself sampled anything on the menu.

HMO officials give themselves a gag order

Neither WellPoint nor Aetna would elaborate on their discussions, offering little more than what was said in meager statements prepared for the media. Nor would they speculate about the possible impact of a merger on health insurance customers. "The deal's not closed," says Lisa Mee, a WellPoint spokesperson. "It was just a letter."

"It was just a letter."

Aetna spokesperson Fred Laberge sounded a similar note: "This is a proposal. We can't deal in hypotheticals."

Even if the merger talks prove serious, Aetna and WellPoint will likely have to jump through numerous hoops to demonstrate that an acquisition is in the best interest of their customers, says Hunter, a former Texas insurance commissioner. As with any acquisition, regulators in both Connecticut and California will examine current health plan services, prices, and financial data to set a baseline to measure the way practices might change in the wake of an acquisition, Hunter says. Their guiding principle will be to serve consumers.

Another factor likely to be examined is consumer complaint ratios — the number of complaints customers have filed against their health plans. "Suppose one company has a very bad complaint ratio and the other has a good complaint ratio," Hunter says. "Hopefully, if they merge, it'll be no worse than their average, but even better, it'll lean toward the good end."

Because of its scope, the merger might even require federal approval. When Aetna purchased Prudential HealthCare, it was forced to sell off several of its health plans around the country because of antitrust issues, and that situation could be repeated.

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