Tale of two mergers: Cigna-Anthem goes south; Humana, Aetna drop plans

Cigna Corp. has chosen to terminate its proposed merger agreement with Anthem, Inc., which would have combined two of the largest medical health insurance carriers in the U.S. in a $54 billion deal. The decision comes after a D.C. court order enjoining the transaction. The district court found that the merger would decrease competition and lessen choices in the health insurance market and that the competitive harm could not be offset (see Swan song for Anthem’s acquisition of Cigna?, Health Law Daily, February 9, 2017). In 2015, proposed mergers were announced between four of the five largest health insurance companies in the United States. In addition to Anthem’s proposed acquisition of Cigna, Aetna, Inc. attempted to purchase Humana Inc., and the subject quickly came under scrutiny (see To merge or not to merge, that was the question before a Senate subcommittee, Health Law Daily, September 24, 2015).

In Cigna’s announcement about the merger termination, the company noted that its decision was based on its belief that the proposed merger would not have been approved. To effect termination, Cigna filed a complaint in the Delaware Court of Chancery seeking declaratory judgment that it lawfully terminated the merger agreement and that Anthem is not permitted to extend the termination date. Cigna’s complaint seeks payment by Anthem of the $1.85 billion reverse termination fee contemplated in the merger agreement, as well as additional damages in an amount exceeding $13 billion. In response, Anthem sought a temporary restraining order in the same court to enjoin Cigna from terminating and taking any actions contrary to the terms of the proposed merger agreement. Anthem contended that there was still sufficient time to meet the merger agreement date of April 30, 2017, and that the merger would save more than $2 billion in annual medical costs for consumers. Anthem also provided a long list comparing the carrier’s interests in proceeding with the merger and Cigna’s interest in avoiding it.

In addition to Cigna and Anthem’s announcements following the D.C. court ruling, Humana and Aetna recently terminated their pending merger agreement (see Aetna, Humana plan separate futures after dissolving merger plans, Health Law Daily, February 14, 2017; Aetna’s $47 billion purchase of Humana enjoined, Health Law Daily, January 23, 2017). Under the terms of the merger agreement, Humana is entitled to a “breakup fee” of $1 billion, or approximately $630 million, net of tax. Of note, in order to demonstrate that its proposed merger with Humana would not run afoul of antitrust issues similar to the now contentious Anthem-Cigna merger, Aetna had pulled out of some health insurance exchanges for the upcoming enrollment period. Humana has now stated its intent to pull out of the exchanges for 2018. President Trump weighed in on the pullout, repeating the “repeal and replace” mantra. The pullout is based on Humana’s analysis of data associated with the company’s exchange membership following the 2017 open enrollment period, and what it perceived as future uncertainty in the risk pool.

Primary care physicians favor ACA over repeal

In a survey conducted between January and March 2015, only 15 percent of primary care physicians supported a complete repeal of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). With the Republican party intent on changing the healthcare landscape dramatically over the next year, researchers from Johns Hopkins University School of Medicine, the University of Pennsylvania Perelman School of Medicine, and Massachusetts General Hospital found that primary care physicians were split on their views towards the ACA, with approximately 48 percent favorable and 52 percent unfavorable. The survey, published in the New England Journal of Medicine, also found that a majority of the physicians reported that they had seen an increase in the number of Medicaid or newly insured patients, without a decrease in their ability to provide high-quality care.

About 95 percent of all respondents said they did not believe insurers should be allowed to deny coverage to those with pre-existing conditions or charge these patients more; 88 percent favored children kept on parents’ plans until age 26; 91 percent supported tax credits for small businesses that offered employees health insurance; 75 percent supported tax subsidies for individuals to buy insurance; 72 percent supported the Medicaid expansion; and 50 percent supported tax penalties for people who did not buy insurance.

These numbers are substantially less than the 26 percent of the general public who say they want Obamacare gone, as reported by the Kaiser Family Foundation. In the NEJM published survey, no physicians who self-identified Democrats reported being in favor of ACA repeal. But the survey also demonstrated a dissonance between physicians beliefs about patients’ healthcare entitlements and what a healthcare system can cover. For instance, as noted, 95 percent of physicians believed the prohibition on denying coverage for those with pre-existing conditions should continue, but only 50 percent supported the individual mandate despite the difficulties of covering as many individuals as possible without the penalty in place.

Overall, 426 physicians responded to the survey and the response rate was 45.1 percent. The researches noted that nonresponses limited their ability to generalize findings and that primary care physicians could have different views from other physicians.

 

 

Firms make major additions, changes to bolster health presence

A number of prominent firms made recent additions to bolster health care ranks, providing more expertise relating to issues impacting entities from hospital systems to medical device companies.

Akin Gump

The Washington D.C. firm representing clients in the United States and overseas on commercial, environmental, regulatory, real estate, health care, and communications added former Wisconsin governor and HHS Secretary Tommy G. Thompson as an Adjunct Senior Advisor. Thompson was previously a partner at Akin Gump from 2005 to 2012. Thompson will work in an advisory capacity, providing advice to clients on a range of policy and business issues. As HHS Secretary, Thompson helped with the passage of the Medicare Modernization Act in 2003.

Polsinelli

The firm has added associate Abby Bonjean to its Health Care practice in its Chicago location. Bonjean spent the last six years as an investigator with the HHS Office for Civil Rights (OCR), investigating large breaches, evaluating organizations’ responses to breach incidents and negotiating settlements – including a $5.5 million enforcement settlement, the largest such settlement to date. At Polsinelli, Bonjean will use her experience to help health care organizations implement measures to avoid data privacy breaches and manage other HIPAA compliance issues.

Verrill Dana

The Boston location added James Roosevelt Jr. as a member of the firm’s Health Care group. Roosevelt is one of the longest serving health care executives in Massachusetts, joining Verrill Dana after more than 10 years as the President and Chief Executive Officer of Tufts Health Plan. Roosevelt brings experience from both the provider and payer perspectives, having chaired the Massachusetts Hospital Association, the Massachusetts Association of Health Plans and America’s Health Insurance Plans, and served on the board of the American Hospital Association. He is also a past president of the American Health Lawyers Association.

Shook, Hardy & Bacon

The firm announced that Partners Alicia Donahue and Jon Strongman will lead Shook’s national pharmaceutical and medical device practice. The group will advise clients on navigating complex science- and health-based litigation, as well as the operational, technological and regulatory challenges of today’s business environment. Donahue, based in San Francisco, will take over as practice chair. Strongman, who will serve as the group’s vice-chair, is based in Kansas City and has worked with the drug and device industry for the entirety of his career.

Arnall Golden Gregory

The Atlanta and Washington D.C. based Arnall added a number of partners to its practice. Lanchi N. Bombalier focuses her practice on providing regulatory counsel for a variety of clients in the healthcare industry, including hospitals, nursing homes, assisted living facilities, home health and hospice agencies, rehabilitation therapy providers, substance abuse treatment centers, and other ancillary service providers. Jessica T. Grozine focuses her practice on federal and state healthcare regulatory matters, representing nursing homes, hospitals, ambulatory surgery centers, and other healthcare providers on issues relating to operations, compliance, certificate of need, and a variety of healthcare transactions. W. Jerad Rissler counsels and represents healthcare clients in a broad range of healthcare and business disputes, with a particular focus on issues involving government payments, defense of professional liability claims, and regulatory compliance.

 

Protected health info and HIPAA focus of HHS discussion

With 2017 just beginning, covered entities under the Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191) need to be aware of current trends in the realm of protected health information (PHI). In a Health Care Compliance Association webinar titled “What’s New on the HIPAA Front?” Vaniecy Nwigwe and Debbie Campos of HHS Office for Civil Rights presented an overview discussion of PHI designation and authorization, PHI breaches, enforcement matters, and marketing.

The HIPAA Privacy Rule generally requires covered entities, i.e. health plans and most health care providers, to provide individuals, upon request, with access to the PHI about them in one or more “designated record sets” maintained by or for the covered entity. This includes the right to inspect or obtain a copy, or both, of the PHI, as well as to direct the covered entity to transmit a copy to a designated person or entity of the individual’s choice, as described in 45 C.F.R. Sec. 164.524(c)(3).

PHI designations

Designation occurs when an individual directs the covered entity to transmit the PHI about the individual directly to another person or entity designated by the individual. Conversely, authorization occurs when an individual gives permission to another person to direct the covered entity to transmit the PHI to another person (or entity) designated by the authorized individual (or entity).

The same requirements for providing the PHI to the individual, such as the fee limitations and requirements for providing the PHI in the form and format and manner requested by the individual, apply when an individual directs that the PHI be sent to another person.

According to the speakers, this distinction matters because of fees. The fee limitations only apply to individuals who direct a covered entity to send PHI to another person or entity. Under the Privacy Rule, a covered entity is prohibited from charging an individual who has requested a copy of her PHI more than a reasonable, cost-based fee for the copy that covers only certain labor, supply, and postage costs that may apply in fulfilling the request.

Breaches

From September 2009 through November 2016, approximately 1,738 instances involving a breach of PHI affecting 500 or more individuals were reported. Of that, 60 percent of the breaches initiated through theft or loss. In addition, there were over 58,000 reports of breaches of PHI affecting less than 500 individuals during calendar year 2016 alone.

Enforcement

Highlighting some of HHS’ enforcement actions, the speakers noted that over 125,445 complaints had been received as of December 31, 2015, and over 30,000 cases have been resolved with corrective action or technical assistance. HHS expects to receive 22,000 complaints in 2017.

In one prime example of a major breach, the speakers noted that nonprofit health system, St. Joseph Health’s ePHI was publicly accessible on the internet from February 1, 2011, to February 13, 2012, affecting the records of over 31,800 individuals. St. Joseph Health agreed to adopt a comprehensive corrective action plan and pay $2.4 million to settle allegations that the health system violated the HIPAA Privacy and Security rules (see Health system slammed over searchable internet server, Health Law Daily, October 19, 2016). St. Joseph Health also agreed to conduct an enterprise-wide risk analysis, develop and implement a risk management plan, revise its policies and procedures, and train its staff on the revised policies and procedures.

Marketing

Generally, a communication about a product or service that encourages recipients of the communication to purchase or use the product or service is considered marketing. In the case of covered entities, if the communication rises to this level, the covered entity must obtain an individual’s authorization to do so. Another form of marketing communication is an arrangement between a covered entity and any other entity whereby the covered entity discloses PHI to the other entity, in exchange for direct or indirect remuneration, for the other entity or its affiliate to make a communication about its own product or service that encourages recipients of the communication to purchase or use that product or service.