Tennessee’s Participation in Anti-Trust Lawsuit to Block Anthem-Cigna Merger: Promoting Competition or Playing Favorites?

July 23, 2016

On Thursday, nearly one year ago to the day after Anthem and Cigna announced a $54 billion mega-merger, Tennessee Attorney General Herbert Slatery joined eleven other states and the U.S Dept. of Justice in filing a federal lawsuit in the U.S. District Court for the District of Columbia to block the proposed merger. The lawsuit alleges that merger of these two insurance giants would harm competition in Tennessee and across the country by limiting price competition, reducing benefits, decreasing incentives to provide innovative wellness programs, and lowering the quality of care.

Attorney General Slatery was quoted as saying:

“[i]n what instance would Tennesseans want 4 instead of 5 competitors from which to choose insurance products or negotiate services? That is the question raised by the merger. Whether one is a national employer comparing benefits and premiums, a health care provider like a hospital or physician practice, or an individual selecting a policy on an exchange. There are too many unanswered questions and too much at stake in reducing competition for Tennessee to support this merger.”

I found myself scratching my head and straining to understanding the anti-competitive impact the proposed merger would have on the health insurance markets in the State of Tennessee, particularly the commercial and individual market. Anthem Inc. owns and operates commercial health plans under the Blue Cross Blue Shield name (which it licenses from the Blue Cross Blue Shield Association) in 14 different states, but Tennessee isn’t one of them. Tennessee’s Blue Cross Blue Shield plans are owned and operated by an independent member company, Blue Cross Blue Shield of Tennessee, Inc., based in Chattanooga. Anthem has no presence in the commercial health insurance market in the State of Tennessee. Anthem’s participation in the Tennessee health insurance market is limited to the TennCare program through a subsidiary, Amerigroup, which is a TennCare managed care organization.

Cigna is the second largest commercial health insurer in the State of Tennessee, behind only Blue Cross Blue Shield of Tennessee, Inc. in the total number of covered commercial lives.  Cigna and Blue Cross Blue Shield of Tennessee, Inc. are the only two insurers from whom Tennessee state employees can choose from to administer state-sponsored health insurance benefits. Currently, Cigna’s participation in the individual exchange market is limited to less than nine percent of the total individual exchange market share, compared with nearly 70% market share held by Blue Cross Blue Shield of Tennessee, Inc. Cigna also has no small group market plans.

It is widely speculated that if Anthem’s acquisition of Cigna were to be approved, Anthem would expand the health insurance products offered in Tennessee to include more robust participation in the individual commercial marketplace and other small group commercial markets. Currently, the only major player in the individual marketplace in Tennessee is, you guessed it, Blue Cross Blue Shield of Tennessee, Inc.

The most significant impact of Anthem’s proposed acquisition of Cigna—as far as the State of Tennessee is concerned–is not its anti-competitive effect on insurance choices, coverage, and benefits. It seems to be just the opposite. The biggest effect would seem to be the threat posed to Blue Cross Blue Shield of Tennessee, Inc.’s market share by creating a true competitor for Blue Cross Blue Shield of Tennessee, Inc.—a competitor that could challenge Blue Cross Blue Shield of Tennessee, Inc. for covered lives on a level that Cigna is incapable and/or unwilling to do.

Regardless of the State of Tennessee’s support for this anti-trust lawsuit, the merger is now expected to fizzle out given the Dept. of Justice’s opposition, prompting a $1.85 billion break-up payment from Anthem to Cigna. It’s not difficult to see whey a merger would reduce competition in other states where Cigna and Anthem are competitors, which is not really the case in the Tennessee insurance market. So why then is the State of Tennessee’s chief law enforcement officer and lawyer crying foul against Anthem? Perhaps there are other business reasons why this merger is not right for Tennesseans. The purported reduction in price competition, insurance benefits, coverage, quality, and wellness initiatives that would occur in the State of Tennessee’s health insurance market if the merger is approved, as alleged in the federal lawsuit our state filed on Thursday, is not one of them. It seems that preventing Anthem’s entry into the commercial health insurance markets in Tennessee preserves Blue Cross Blue Shield of Tennessee, Inc.’s huge market share.

Premiums on BCBST’s individual plans increased 19% in 2015, 36% in 2016, and are expected to increase by an estimated sixty-two (62%) in four months. Despite these rate hikes, Blue Cross Blue Shield of Tennessee, Inc. claims that it lost $300 million on the individual exchanges in 2014 and 2015. Perhaps a little competition from Anthem might be just what the doctor ordered for Tennessee’s commercial and individual health insurance markets.

Todd Siroky is a healthcare and business attorney with Siroky Law, PLC

Opt Out of Pokémon Go Terms of Service Before You Fall Off a Cliff . . . Literally
July 16, 2016

The Pokémon Go craze has hit West Tennessee full force. No matter your occupation or age, Pokémon Go has appealed to a wide-aging and wide-ranging demographic of West Tennesseans. In just five hours, Pokémon Go reached the top of the app download charts in the United States.  In a matter of just one week, it overtook Candy Crush Saga to become the biggest mobile gaming app in U.S. history based on peak daily active users. The stock of Nintendo, an investor in Pokémon Go’s developer, Niantic Labs, increased by 10% overnigh and 86% in the first week following its release, adding $15 billion in market value to the company.

For those of you who have been living on another planet the past two weeks, Pokémon Go is a smartphone app which uses an augmented reality treasure hunt to let players catch digital Pokémon characters from their mobile devices. The new app from Niantic Labs (owned in part by Nintendo, Google, and other tech giants) uses your phone or mobile device’s GPS and clock to detect where you are and to make digital characters appear on your phone screen through your phone’s camera. These digital characters might be in a public place, a bathroom, your neighbor’s yard, and, yes, even at the courthouse. Your job is to find them all and catch them.

The law nerd in me wondered what liability Niantic Labs has to gamers and other unsuspecting third-parties by creating a phenomenon that encourages gamers to walk, drive, and run through the real world staring at a smartphone screen while trying to catch a Pokémon. The problem may be that gamers are so enthralled in the augmented reality game that they could hurt themselves, hurt others, unknowingly commit a crime, or be the victim of a crime by another who uses the app to intentionally hurt someone. Who is liable when one gamer places a Pokémon character in a dangerous location that causes another gamer to be injured or assaulted? Oftentimes, multiple gamers wills show up to the same place and physically compete for the same physical space while trying to catch a Pokémon. What happens when one gamer hits another one in the face while trying to catch a Pokémon?

Those pesky digital terms of service that we all scroll down numerous pages that we don’t read when we are anxious to open a new app and quickly check “I agree” are worth reading in this app. The Pokémon Go terms of service purport to:

  1. Disclaim Niantic Lab’s liability for property damage, personal injury or death while playing the game;
  2. Strip the rights of app users to file a lawsuit against the company through a restrictive arbitration clause; and
  3. Prevent any type of class-action against the Niantic Labs

With the massive numbers of gamers playing a game that encourages players to go to unfamiliar public and private places while staring at a screen and not paying attention, it is inevitable that there will be a lot of “GoSuits” that assert liability against Niantic Labs and others arising out of players conduct while gaming. In fact, there may already be some “GoSuits” that have been filed.  As augmented reality becomes a reality in West Tennessee, it will be interesting to see how it may impact or help develop our State’s laws.

According to a recent post by Chris Morran of The Consumerist, the Pokémon Go terms of use include an arbitration opt-out provision for people who do not want to give up their right to file a lawsuit. According to the article, a user must opt out within 30 days of first agreeing to the Terms of Service by sending an email to termsofservice@nianticlabs.com with “Arbitration Opt-out Notice” in the header of the email.


July 31, 2015

Fifty years ago today, President Lyndon B. Johnson signed the Medicare & Medicaid bill into law and enrolled the first Medicare beneficiary, former President Harry S. Truman, following a signing ceremony at the Truman Presidential Library in Independence, Missouri.  At the time, approximately half of Americans over the age of 65 were uninsured.  Now, the Medicare Program covers nearly 56 million seniors, and fewer than 2% of all those over the age of 65 in our nation lack basic health insurance coverage.  The Medicaid Program now covers an estimated 69 million people, including an estimated 1 in 3 children in our nation, making it the largest governmental health program by the number of insured individuals.  Medicaid pays for roughly half of all births and half of the nursing home bills in our country.  Together, the two programs accounted for roughly 23% of our nation’s $3.5 trillion budget last year, and accounted for an estimated 35-40% of all health care spending in our nation last year.  

Regardless of political leanings, there is no question that the Medicare and Medicaid programs have had a tremendous impact, perhaps the most important impact, on the growth and makeup of the healthcare sector in our country over the last fifty years.  It would be hard to imagine what our private and public healthcare delivery system would look like today if there never were federal subsidies to the healthcare sector in the form of Medicare and Medicaid.  Would we have a healthcare sector that employed nearly 1 in 10 workers in this country with an estimated $4 trillion in spending in 2015?  What would our nation’s average life expectancy look like?  Where would our country rank among developed nations in the cost and quality of healthcare?    

I tend to believe that the private markets and the ingenuity of the American people would have prevailed in the absence of a large federal payer presence in the healthcare market.  However, I am quite certain that nearly every facet of healthcare delivery, jobs, and payment in this country today would be markedly different (not necessarily better or worse) if these programs did not exist.          


July 18, 2014

The Centers for Medicare & Medicaid Services (“CMS”) issued a Proposed Rule on July 3rd (published in the Federal Register on July 11th) that proposes updates and changes to payment policies and payment rates for services furnished under the Medicare Physician Fee Schedule (MPFS) beginning with dates of service on or after January 1, 2015. CMS estimates that MPFS payment rates will be reduced by 20.9% beginning on April 1, 2015unless Congress intervenes with another “doc fix”.  Comments on the Proposed Rule are due by September 2, 2014.  The Final Rule will be published in November 2014.

Some of the areas addressed under the Proposed Rule include: Chronic Care Management Services; Misvalued Codes, Enhanced Transparency in Rate-Setting, Tele-Health Services, and eliminating all ten (10) and ninety (90) day global surgery codes beginning in 2017 and paying for services provided on the day of surgery and post-surgical visits separately. 

It seems unlikely at this point that Congress and the current Administration can work out a long-term deal to address these issues.  The Balanced Budget Act of 1997 requires CMS to utilize the sustainable growth rate to control its costs.   While Congress has intervened in most years to temporarily delay these required cuts, it remains to be seen whether Congress will intervene with another “doc fix” to address the estimated 20.9% reduction in payments set to go into effect in April 2015

CMS’ summary of the Proposed Rule is available here (insert hyperlink to http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2014-Fact-sheets-items/2014-07-03-1.html)

The full text of the Proposed Rule is available here (insert hyperlink to http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/PhysicianFeeSched/PFS-Federal-Regulation-Notices-Items/CMS-1612-P.html)

Get Your HIPAA House in Order Before the Office of Civil Rights Sends You a Hefty Cleaning Bill

March 31, 2014

The latest announcement from United States Department of Health & Human Services (“HHS”), Office of Civil Rights (“OCR”), on the HIPAA Privacy & Security front addresses what I think may be one of the more heavily regulated areas in the healthcare industry in the coming years.  I know, you are thinking to yourself, “what area in the healthcare industry is not heavily regulated right now?”  Privacy and security of data and information are a hot topic of debate in the post-Edward Snowden era.  It should come as no surprise with rapidly evolving social media outlets, data storage services and devices, and technology (particularly mobile technology), that there is an uptick in HIPAA enforcement actions against providers with regard to electronic storage of patient medical records and other electronic protected health information (“ePHI”).  HHS is likely to continue to increase its capacity for these types of enforcement actions/threatened enforcement actions for HIPAA violations over the next few years.     

On March 7, 2014, OCR announced that it had entered into a $215,000.00 monetary settlement with the county government of Skagit County, WA, over allegations that the county health department violated the Privacy, Security, and Breach Notification Rules of the Health Insurance Portability and Accountability Act (“HIPAA”).  This case was a first of sorts for OCR, marking the first time OCR entered into a settlement agreement with a county government to resolve alleged HIPAA violations.  In its press release, OCR stated that this case sends "a strong message" to healthcare providers that they must adopt "a meaningful compliance program to ensure the privacy and security of patients’ information."  In addition to the $215,000.00 monetary settlement, Skagit County was required to adopt a corrective action plan and submit to OCR oversight and monitoring for a three (3) year period.  The investigation of this particular security breach revealed allegations that electronic personal health information (“ePHI”) of over 1500 unique patients treated at the Skagit County Health Department had been compromised when it was moved to a publicly accessible server that could be searched by the general public for a period of approximately two (2) weeks.

This obvious HIPAA violation led to greater scrutiny of Skagit County’s HIPAA privacy and security policies in general, which uncovered general and widespread HIPAA non-compliance.  Under the terms of the corrective action plan Skagit County agreed to in order to resolve these allegations, Skagit County was required to, among other things, retrain its workforce and submit and subject itself to monitoring by OCR for a three-year period on a variety of HIPAA privacy and security requirements and metrics.

This latest settlement by a healthcare provider to avoid enforcement action follows a string of several other recent HIPAA settlements announced by OCR with a variety of both public and private healthcare providers.  It also follows OCR’s February 24th announcement that it is preparing for its second round of HIPAA compliance audits later this year. The HIPAA audit program is authorized under “HITECH” Act and is intended to assess compliance with the HIPAA Privacy, Security, and Breach Notification Rules. HHS OCR announced that it will soon launch a survey of 1,200 organizations—800 covered entities and 400 business associates—as a first step toward selecting those organizations to be audited.  One of the anticipated focuses of these audits and surveys by OCR is the use of data encryption and an organization's underlying risk analysis in deciding whether to encrypt or not encrypt ePHI. Another anticipated focus of these OCR audits and surveys will be whether the organization has conducted the security risk analysis it is required to conduct and continually reassess under HIPAA.   

It will be interesting to monitor OCR’s interpretation of the regulations and pattern of enforcement of HIPAA in the coming years.  Stay tuned. 

Todd D. Siroky is a healthcare attorney with Siroky Law, PLC.