Were ready to reconvene. Senator klobuchar is next. Thank you very much, mr. Chairman. I talked a little bit about the Health Insurance consolidation and i know we had some quick answers there from both of you. We have a little more luxury of time now, so if you could, finish up, mr. Swedish. I was asking you, remember, about why you needed the merger to achieve some of these cost goals that you have. Thank you for the followup question. What id like to do is maybe describe to you the various products and services that we do offer in terms of how we segment our business. This is a highly segmented industry that then serves a very focused effort in and around the local markets. For instance, we are very active, as is cigna, in the National Marketplace serving Large National accounts. These are very sophisticated highly educated buyers of Health Care Services typically using consultants who they rely upon to make the selections for the health plan that will serve them in the National Marketplace they reside in. So specific to your question about why come together, well both be better able to serve that Customer Base of National Accounts that highly desires our support as an Administrative Services only support team to what they need in terms of health plan delivery. Whats fascinating when people ask about the Competitive Landscape specific to National Accounts is that there are 130 unique Health Benefit companies serving that selfinsured marketplace. In 2014, there were 30 new companies that began competing in that space. The gao reported in 2014 that there is an average of 11 insurers competing in that Large Group Market for specific contracts, so you can see that the combination of our two companies in an area where were most active is very valuable to the customer. Let me briefly go to another environment. Small group. We do not cross over at all. They dont have small group. Well continue our small Group Coverage competition in markets we serve. With respect to the individual space especially in the exchange environment, they have a very small marketplace in the individual space and today consumers can choose from an average of 40 plans that support their choices. In that regard, its all about choice, whether its a national account, small group, individual plans. Were coming together. Finally, the complementary nature of the two companies allows us to combine and access their expertise in the interNational Market, which we do not have a presence in that space. And finally Services LikeWellness Programs are very vital to moving the needle on value for the customer and cigna has a phenomenal Wellness Program that will integrate with us, which then translates to more value to the consumer. So the combination of all those products and services brings value to the marketplace that i would argue is significant in value. We both believe one and one equals three in terms of the combination, in terms of how we can serve the customer. Dr. Ginsburg and dr. Dafny, you both have these studies that youre relying on on consolidation, can explain them in more laymans terms . Maybe you want to start dr. Ginsburg. Maybe your microphone there. I would say certainly the literature on insurer consolidation is a very limited one, and i think professor dafnys study of the aetna prudential merger, which was 15 years ago and is well regarded, she explained how difficult it is to do these studies. The information on provider mergers is much clearer. And what does that show . That shows clearly hospital mergers leads to higher prices and without an impact on quality. This is a very extensive literature thats been synthesized by some very good people. Nevertheless, i think that there are other dimensions that are quite relevant besides consolidation, et cetera, that either policies the policies can make some markets much more competitive. This is what has happened with the Affordable Care act. With the geographic disparities in the country a, thats certainly what we have in our state. Thats what i was trying to get at too that could be a potential solution. The Affordable Care act has those incentives, but we havent seen the full results of them. Weve seen some. I think one of the upsides to consider and perhaps not overdo it and i think were placing a lot of big bets as a country in alternative payment models, value payments is really the only thing weve got to try to address costs on a longterm basis. And i think there are some specifics where insurer consolidation can lead to this trend moving forward more rapidly. I think the role of medicare has been and will be very important in this trend because providers need to move all of their eventually all of their patients from fee for service to valuepayment models. If i may, im delighted by the question what can we learn from Prior Research on this. In addition to the discussion of the aetna prudential merger, there is a study on another larger merger in nevada that found large increases of 14 in small group premiums. I have myself done a study on the individual insurance exchanges, which demonstrates that competition on exchanges also leads to lower prices. In particular one of the Large Nationals sat out in the first year and we estimate in those areas where they had a bigger presence in the individual Insurance Market premiums on the exchanges were higher. Competition matters today and it mattered then. Okay. Very good. Thank you. Senator blumenthal. Thank you all for being here today and the excellent testimony you have offered so far. I am deeply concerned about these mergers because of the potential effect on competition and the concentration of power in fewer hands. Ive expressed those concerns publicly in some sense. I have a feeling that like the saying about marriage that this merger may be the triumph of hope over experience, the experience that is suggested by a lot of the scholarship done in this area is consolidation is so rapidly taking over this industry. We have seen it in other industries and we have seen the consequences of it in higher prices and in this case potentially higher premiums. And i am deeply troubled by the evidence that shows that neither providers nor consumers benefit from these consolidations. In other words, that the prudential aetna experience shows that premiums are not lower, consumers do not benefit, and that the savings are not passed along to consumers. When viewed together, i think both of these proposed deals raise those serious competitive concerns. In addition to conducting a market by market analysis, i believe that the department of justice also must scrutinize these mergers together, all together, as part of a Single NationalHealth Care Market and the goal has to be sustain and enhance, if possible, competition and protecting consumers. I want to focus in particular on an area that has not been covered so far and that is the issue about barriers to entry. As you may know in 2010, former assistant attorney general Kristine Varney explained the results of the review of antitrust division in the Insurance Marketplace and this was her conclusion before the american bar association. Quote, our conclusions reenforce our concern about strong barriers to entry and expansion in Health Insurance markets and are particularly significant in light of the enactment of the Affordable Care act. It is therefore imperative that the division prevent mergers or acquisitions that will create or even increase the size of dominant Health Insurance plans, particularly in the small group and individual markets. Entry defenses in the Health Insurance industry generally will be viewed with skepticism. She was talking about the doj and will never justify an anticompetitive merger. A suggestion has been made, and i think it is a pillar of the argument for this merger that these barriers to entry are insignificant and i think experience belies that contention as assistant attorney general varney explained. Id like responses from mr. Bertolini and mr. Swedish. I understand your point of view. I would like to make clear what the data shows us in the markets where we compete. In Medicare Advantage, there is plenty of competition. 28 new entrants. More than half Hospital Systems over the last three years. More and more Hospital Systems are entering the market. In the public exchanges where we have overlap between aetna and humana, there are at least ten other come pettepetitors. Investments by wall street is evidenced by oscar in new york where google invested 2. 5 million in furthering their expansion of the new york marketplace. All health care is local just like politics. At the local level, we continue to see more entrants. We continue to see more competition, so we are not at all concerned about the lack of competition in the local markets. In Medicare Advantage specifically, the government sets a bench market, which requires us to meet, to offer a affordable plan to consumers. So we have over the last five years from 2010 reduced rates by 6 in Medicare Advantage to the benefit of seniors with a Higher Quality product and a more affordable product each year. Mr. Swedish . Thank you, senator. If i understand the question, its dealing with barriers to entry and the perception that barriers do exist such that new entrants cannot come into the marketplace. There are powerful barriers to entry notwithstanding what mr. Bertolini said. I cant just start an Insurance Company that will have any hope of competing with the combined entity once this transaction is completed. Yes, all health care is local like all politics is local, but there are National Politics and National Markets and those markets are profoundly important for the department of justice to review in scrutinizing this merger because of the barriers to entry and thats true of other industries as well, so thats the perspective that prompts my question. Yes, sir, and i certainly appreciate that perspective. What i can share with you is that there are many new players that have entered the market and continued to enter the market. I would like to begin with reference to oscar that mr. Bertolini just brought up serving new york and new jersey. Year one of their entry of that highly competitive marketplace, they accumulated 45,000 new members and the company was founded based on Venture Capital funds and a google investment that will accelerate their engagement in the marketplace by way of them going to california next year. Again, one company, multiple products, demonstrated success year one. Let me underscore maybe the bigger view. As we deal with the National Marketplace for large group and National Accounts, what weve witnessed is 30 new companies that have entered the marketplace competing in the National Accounts sector. Gao report brought out the fact that on average there are 11 insurers competing amongst themselves for National Accounts. With respect to another slice of the development in the marketplace, pwc in 2014 revealed that 50 of u. S. Health care systems have or intend to apply for an insurance license. In fact, it was just brought out a little while ago that with respect to serving public exchanges, 37 provider sponsored plans are now in the marketplace offering coverage for enrollees in the exchange environment. My point is that competition is becoming more robust, not less, with respect to our combination with cigna. Quite frankly, we are compatible and Complementary Companies without a lot of overlap in how we engage in the marketplace. In that way, i believe we will bring great value to our kus r customers. My time has expired. I want to thank both of you for your very informative responses. I think we have only begun to scratch the surface in terms of the data and the material that has to be reviewed by the department of justice, and i hope that the scrutiny will be exacting and demanding as i know you expect it will, but there seem to be two very different factually grounded perspectives here. One offered by professor dafny in the charts and testimony that shes offered and in the other that youve presented, and i think it may result from the way markets are sliced and diced and the different analysises that are done. My hope is that the department of justice will look at the National Market rather than only the local markets because insurance is not all local. Thank you. Thanks, mr. Chairman. Senator tillis. Thank you, mr. Chair. I want to welcome all the panelists. Thank you for your testimony. I was here for the testimony. And i apologize. I had another meeting, a vote, and another meeting and then another meeting before i got here, but its not for lack of interest and ill certainly be reviewing the comments from some of my colleagues. This is a very complex process in not only the issues that you have to deal with in terms of the Geographic Market competition, the saturation, all these other things. A number of the things that dr. Dafny mentioned go beyond, i think, the things we tend to look at. Im Glad Congress saw it fit to make this is a task that the doj would do. As far as im concerned market concentration is what im doing at the Grocery Store in trying to figure out what my wife asked me to buy when i got there. The way youre looking at market concentration here and all the other factors is in an area that should be making judgments on a nonpolitical basis on the merits of the deal based on factors that have been outlined. Heres a concern that i have with this particular transaction. Its been alluded to by some have the comments today. Different Public Policies that have been outside forces that are causing some of these things to occur either in the Insurance Industry or in the hospital industry. So my question is do you feel like in light of particularly some biases on the administrations part on where we should go with health care in the future in this nature, do you feel like the prices that we have in place in the thedoj is likely to produce a decision based on the parameters set forth versus something that may potentially be influenced by an outcome that better serves legacy agenda item . Ill start with dr. Ginsburg. Well, certainly the department of justice is guided by the age old antitrust laws, which i think has served the country very well. Clearly, there are judgments that are hard judgments to make. I really cant get into the minds of the officials in the Justice Department as to how they will come out, but i think they are committed to very extensivebertolini, what are yo thoughts . Senator, i believe the process is very thorough and complete. We expect it will be a fair and appropriate process. Dr. Dafny, you mentioned and im a data person myself. I ran a Data Analytics practice before i entered politics. Do you have enough insights in the process now . You and i may be coming from a different frame in the argument the data would support. Im confident in the process of the department of justice. I just wish that the public had some access to the information so that we could perform analyses too. I think thats a valid point in terms of transparency, but i understand some of the competitive elements that have to be taken into account. It seems to me one trend would cause the other trend to occur. In North Carolina, weve had a lot of consolidations. To your point, mr. Pollack, weve had problem hospitals in rural areas that were acquired that may have been out of business diminishing our ability to serve the rural population, which is the most underserved in North Carolina probably nationally. By the same token of consolidation, you mentioned how it has improved outcomes and the delivery of services. One of the advantages to the kinds of mergers that were talking about here is that and im not missing the sumo wrestler analogy, but as long as that trend continues, it seems to me that as someone who is involved in strategic sourcing and supplier negotiations that there is a valid argument to the extent that you have a larger buyer base. Youre probably going to be negotiate better price points not only for medical services provided, but also addressing a very serious problem about the cost of pharmaceuticals. Ill start with mr. Swedish and then time provided, our chair allowing, have at least one other person respond. Thank you. Thank you, senator. If i understand the question, its about provider consolidation and the provider consolidation is something that the hospital industry has used an argument for improving care and reducing cost. I think a part of your argument theres very cheerilycheer clearly a model you want to adopt and have pervasive in the services you provide, but what im getting to is the business of your business