The Stench Of Crony Capitalism In Hartford—-How The Cigna/Anthem Merger Is Getting Done

By Tyler Durden at ZeroHedge

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.

– Adam Smith, The Wealth of Nations

The best way to describe Obama’s entire sleazy reign is to liken it to a Potemkin village. Everything he’s done was designed for appearances as opposed to results. Actually, that’s not really true. Everything was done to help further enrich a handful of crony insiders while appearing to be working in the public interest.

One of the best examples of this is Obamacare. Superficially, more people have coverage, which sounds great in soundbites for propaganda purposes. Unfortunately, as I pointed out in the post,  The Health Insurance Scam – “Coverage” Doesn’t Mean Affordability or Access:

Obama administration officials, urging people to sign up for health insurance under the Affordable Care Act, have trumpeted the low premiums available on the law’s new marketplaces.

But for many consumers, the sticker shock is coming not on the front end, when they purchase the plans, but on the back end when they get sick: sky-high deductibles that are leaving some newly insured feeling nearly as vulnerable as they were before they had coverage.

“The deductible, $3,000 a year, makes it impossible to actually go to the doctor,” said David R. Reines, 60, of Jefferson Township, N.J., a former hardware salesman with chronic knee pain. “We have insurance, but can’t afford to use it.”

This is textbook Obama. You take a problem and pretend to fix it, but at the end of the day all you have created is a novel scheme to further enrich and empower entrenched interests.

Of course, the modern American economy is so unbelievably corrupt, this sort of behavior is happening constantly and throughout all levels of government. The most recent example has been uncovered by the always excellent David Sirota over at International Business Times. He are some choice excerpts from his  must read piece, Will Cigna And Anthem Merge? How Health Insurance Companies Pump Money Into Politics:

Is bigger necessarily better? That age-old question is no abstraction when it comes to your healthcare premiums, as Cigna and Anthem Blue Cross Blue Shield are pushing to merge into the largest health insurance company in America. With consumer groups, physicians and hospital officials insisting that the consolidation threatens to limit medical care and jack up insurance prices for millions of Americans, regulators in one small state, Connecticut, are positioned to play a pivotal role in determining whether the companies get the approval they need.
The state is home to Cigna and has long been friendly to the industry, building up a reputation as the insurance capital of America. But some watchdog groups say that with a recent personnel move inside the state government, the friendship has gotten too close for comfort.

When Anthem’s plan to acquire Cigna was being negotiated in early 2015, Connecticut’s Democratic Gov. Dannel Malloy appointed Katharine Wade as his state’s insurance commissioner: She was a longtime Cigna lobbyist whose father-in-law works at a law firm that lobbies for the company, whose mother and brother previously worked at Cigna, and whose husband still does. She was also a top official of the major lobbying group for the state’s health insurance industry. As commissioner, she appointed a top deputy who worked at Cigna and she had a former longtime Cigna employee serve as an agency counsel in the merger review. As Wade continues to oversee Connecticut’s review of Cigna’s merger, she recently secured a position chairing a healthcare policy committee for insurance commissioners across the country. Malloy’s decision to appoint Wade to such a powerful regulatory post on the eve of the merger was not made in a vacuum. It came after employees of Cigna, its lobbying firm Robinson & Cole and Anthem delivered more than $1.3 million to national and state political groups affiliated with Malloy, including the Democratic Governors Association (DGA), the Connecticut Democratic Party, Malloy’s own gubernatorial campaign and a political action committee supporting Connecticut Democrats.

I know, it’s hard to wrap your head around the extent of that carousel of cronyism.

Malloy had previously served as a finance chairman of the DGA, was named DGA chair-elect in 2014, and assumed control of the organization as of late last year. In the 2016 election cycle, Cigna and Anthem have become among the largest donors to the group, according to the nonpartisan Center for Responsive Politics. In the midst of the merger push, Anthem has also hired public relations firm SKDKnickerbocker — the same firm that helped run Malloy’s first successful campaign for governor.

“This looks like a conflict of interest, not a mere coincidence,” said Quickmire, whose group aims to reduce the influence of money in politics. “Hiring a lobbyist for the industry to be the regulator of that industry does not seem appropriate. She should not be in charge of the review, and people should definitely be worried that if she doesn’t recuse herself, the review will not be impartial.”

For her part, Wade has already proven to be merger-friendly: In January, her department approved a controversial deal to combine Connecticut-based Aetna with Humana. Wade’s agency only announced that move last week, and its approval came without Connecticut regulators holding a public hearing on the matter — a move that drew scathing criticism from consumer and physician groups.

While criticism of her role mounts, Wade is taking a hands-on approach to the merger. Emails obtained by IBT make reference to her seeking biweekly conference calls with Cigna and Anthem about the companies’ progress on the merger with other state regulators. Visitor logs obtained by IBT show that during just the last eight months of 2015, Wade and her staff held 24 in-person meetings with officials from Cigna, Anthem or the companies’ lobbyists. Wade’s agency has also worked with Malloy’s office on pushing new legislation — backed by the health insurance industry — that would empower Connecticut officials to shield financial information about the companies from open records laws.

With regulators like these…

Meanwhile, how do the companies justify the merger? It’s for the good of the people! Of course it is.

Anthem and Cigna have presented a much cheerier view of what the future would look like if they receive regulatory approval for the merger deal they announced in July of 2015. The $48 billion transaction they proposed would create what the companies say is a conglomerate with more than 53 million members and more than $115 billion in annual revenues. On the basis of membership, the new firm would be the largest insurer in the United States. With premiums and deductibles rising, company officials say that size will benefit consumers by empowering the company to squeeze savings out of the healthcare system, and promote the kind of collaboration that can help physicians more effectively treat their patients.

“The combined companies will operate more efficiently to reduce operational costs and, at the same time, further our ability to manage what drives costs, helping to create more affordable healthcare for consumers,” said the companies in their joint website promoting the merger.

Now here’s the reality.

An analysis by researchers at Northwestern University, the University of Pennsylvania and UCLA found that the 1999 merger of Aetna and Prudential “raised premiums by roughly 7 percent.” A subsequent study of Nevada markets affected by the merger between United Health Group and Sierra found that premiums jumped nearly 14 percent. And just last month, a study by University of California, Berkeley, researchers found that in the last few years, premiums rose faster in parts of New York where there was less insurer competition. The same study found that consolidation did not have the same effect in California, but probably because state officials drove a harder bargain with insurers.

Insurance companies’ size, say experts, tracks their penchant for using market power to raise premiums, knowing it will be difficult for consumers to find alternatives. A recent analysis published in the Journal of Technology and Science found that “the largest insurance company in each state on average increased their rates 75 percent more than smaller insurers in the same state.”

“Insurance consolidation will tend to lead to lower payments to healthcare providers, but those lower payments will not be passed on to consumers,” Northwestern’s Leemore Dafny told a congressional hearing on mergers a few months after the announcement of the Anthem-Cigna transaction.

According to a recent analysis of market data by the American Medical Association, the merger would “raise significant competitive concerns” in Ohio, California, New York and Wisconsin, and further consolidate insurance markets in 10 other states where Anthem already operates. The American Hospital Association estimates that more than 800 local markets serving 45 million people would see the companies gain market power and would subsequently “lack sufficient local competitive alternatives.” In a separate study of the proposed merger, Edmund Haislmaier of the conservative Heritage Foundation noted that the main effect of the merger would be to enhance Anthem’s dominance of employer-based health insurance plans in the 14 states where it already operates.

Physicians and the groups representing them have raised some of the strongest objections to Anthem’s proposed merger with Cigna. During a California hearing about the deal, physical therapist Dennis Langton testified that patients covered by both companies had experienced delays and retroactive denials for services deemed medically necessary by doctors.

“We are dealing with two companies that have failed to administer their specialty networks in a manner beneficial to the consumers,” said Langton, who has practiced for 43 years in San Diego. “Allowing two dysfunctional programs to combine forces seems like a recipe for disaster.”

Doctors, what do they know? Much better to let a crony Cigna-linked regulator make all the tough decisions.

Matthew Katz of the Connecticut Medical Society told IBT that doctors in his state will see their bargaining power eroded.

“If one mega company is now 60 percent of the market but is a bad actor in that market, the patient and the physician are stuck, and the company can limit their network, tier their network and limit access to care,” he told IBT. “A physician may look at a network that is making it difficult to deliver necessary care, but when that network is 60 percent of the market, they can’t walk away from it.”

With that out of the way, let’s get back to the cronyism and Connecticut’s unique regulatory role in this charade.

To date, 12 states have approved the proposed Anthem-Cigna merger. However, few are positioned to play as big a role in reviewing the transaction as Connecticut, where Cigna has more than 4,000 employees and where Cigna and Anthem — if merged — would control roughly two-thirds of the state’s health insurance business. Because Cigna’s headquarters are just outside Hartford, the state’s regulatory actions could significantly complicate — or facilitate — the deal. Though Connecticut has yet to act, regulators from across the country and at the federal Justice Department are looking to officials there for guidance on whether to approve or reject the merger.

In the years before the merger announcement, Connecticut Gov. Malloy had been helping Cigna. Shortly after donors from the insurance company and its lobbying firm pumped nearly $26,000 into groups supporting his 2010 election campaign, the governor’s administration announced it was delivering $50 million worth of state aid to the insurance company. At the time, Malloy’s administration said the money was in exchange for Cigna’s commitment to create jobs in the state, but the terms of the deal allow some of the taxpayer largesse to continue flowing even if a merger is approved and the company subsequently sheds Connecticut jobs.

Between Malloy’s 2010 election and early 2015 — when Cigna and Anthem were in talks about a merger — Malloy-linked groups had raised another $244,000 from donors at Cigna and its outside lobbying firm, Robinson & Cole, as well as more than $1 million from Anthem and Wellpoint. That is when Malloy nominated as state insurance commissioner Katharine Wade — who until 2013 was Cigna’s vice president for public policy as well as an officer of the Connecticut Association of Health Plans, the trade association that lobbies state officials on behalf of the health insurance industry.

Katharine Wade was a familiar name to Malloy. Her father-in-law, James Wade, had been an outside counsel to the Connecticut Democratic Party and was the chairperson of a political action committee that Malloy raised money for and that supported Malloy’s state party. He is also an attorney at Robinson & Cole — the firm that lobbies for both Cigna and the Connecticut Association of Health Plans. Malloy previously celebrated the firm in 2009 and later appointed one of its partners to a powerful judgeship.

I feel dirty just reading this. 

Malloy’s administration began preparing Wade’s nomination to head the insurance department in February 2015 — the same month Anthem deposited $250,000 into the coffers of the DGA, which had backed Malloy’s gubernatorial campaigns and which Malloy was slated to chair. The donation was one of the largest the company had ever made to the group, according to federal records that date back more than a decade. Over the next three months, as Wade was formally nominated for the position, Anthem and Cigna would together give the DGA another $175,000.

Malloy’s office steadfastly stood by Wade amid the controversy. Emails obtained by IBT show that weeks after Anthem gave another $25,000 to the DGA, a senior Malloy aide told other officials in the governor’s office that Wade “dotted every i and crossed every t.”

In December, the state ethics office — whose board is dominated by appointees of Malloy and Democratic legislators — declined to endorse calls for Wade to recuse herself. The decision came weeks after Anthem poured another $120,000 into the Malloy-run DGA, which has now hauled in more than $510,000 from the two companies since the merger was announced.

Another perfect example of just how incredibly sleazy and corrupt the U.S. banana republic has become.

Source: Shameless Healthcare Cronyism Exposed in Connecticut – ZeroHedge