This Week in Benefits is a new biweekly podcast from Mployer Advisor, the company that is changing the way employers search, evaluate, and select insurance advisors online.

In each episode, our team will bring you the latest news and industry updates in the world of employee benefits. We’ll break down top headlines, bring you interviews with top industry insiders, and highlight market trends and stories we’re following.

In case you missed the series trailer, click here to listen.  

Show Notes

Date: March 23, 2022

Episode Title and Number: Season 1, Episode 1

Episode Title: Why the Justice Department Is Suing to Block UnitedHealth Group’s Latest Acquisition

In this week's episode, Brian Freeman (the Founder and CEO of Mployer Advisor) and Weller Emmons (the VP of Operations at Mployer Advisor) break down why the U.S. Justice Department has decided to sue to block UnitedHealth Group's $13 billion acquisition of Change Healthcare Inc.

To listen to the inaugural episode of This Week in Benefits, click here.  

Additional Recommended Reading From:

The New York Times  

The Wall Street Journal  

Healthcare Finance News

The U.S. Department of Justice  

HealthPayerIntelligence

Looking for more exclusive content? Check out the latest industry news over on the Mployer Advisor blog, and read on for an explainer on “Best Practices to Support DEI in the Workplace.”  

Episode Transcript

Abbey Dean: Hi everyone, and welcome to the inaugural episode of This Week in Benefits, a new podcast from the team at Mployer Advisor where we explore and discuss what's new in the world of employee benefits. I'm your host, Abbey Dean, Mployer Advisor's Head of Content, and thanks so much for being here today. So this week's episode is special, of course, not just because it's our first episode, but also because I have two really excellent people here with me today. The first one is Mployer Advisor's, Founder and CEO Brian Freeman, and then his partner in crime, Weller Emmons, the VP of Operations for Mployer Advisor. So these two are quite the dynamic duo and probably two of the smartest people I've met. So who better to break down a fairly complicated piece of news for us today. So if you're familiar with the story we're going to be talking about, then you've probably seen headlines that read something like this: "Justice Department Sues to Block United Health's Planned by of Change Healthcare." Now, the Justice Department filed an antitrust lawsuit in February, challenging United Health Group's $13 billion acquisition of Change Healthcare. They argued that the tie-up would unlawfully reduce competition in markets for commercial insurance and the processing of claims. So the deal was first announced back in January of 2021, and it sought to bring a major provider of healthcare, clinical, and financial services, including the handling of claims under United Health's Optum Health Services arm. So there's a lot to unpack here. So to learn more about the impact of this deal, why it's important, and what this could mean for brokers in the industry we're going to have Brian and Weller talk to us about it today. For more information to look at some of the articles we're referencing, be sure to look at the show notes at the bottom of this episode too. For now, I'm going to let Weller and Brian take it away.Brian Freeman: All right. Hi everybody. My name's Brian Freeman. I'm the CEO of Mployer Advisor. I'm here with Weller Emmons who leads operations for the company. So it was a little bit of background before I let Weller introduce himself. I had the opportunity to work with Weller in a prior life at one of the largest healthcare companies in the nation. We were looking to recruit a role over, and so we had the opportunity to interview Weller. And inside of his interview, he's rolling his eyes at me right now cause he hates this story. In his interview, I asked him just theoretically, how many ping pong balls could you fit on a 747 airline plane? So Weller picks up his pencil and he used to actually starts to doing the math. So I looked at Weller and I was like, hey, we just need to see how you think through the problem.What kind of questions do you have? And Weller looked at me and said, well, hold on. Give me two minutes and I'll give you an answer. So Weller pops up two minutes later and says something like 19,563,000, et cetera. And so I kind of laughed and said, I'm sure that's somewhere in the range. Well, afterward I go and look up the answer and it's absolutely what Weller had quoted in the interview. So as you can imagine Weller got the job. So since then, just been fortunate to work with him and him to join us an Mployer Advisor on the operations side over the past 12-18 months. Is that about right?Weller Emmons: Yeah, joined in February of 2021. So I guess it's been what nearly seven to eight years that we've been working together in some various capacity. So it's been a fun seven to eight years.Brian Freeman: Absolutely. All right, so good deal. So with this discussion, our goal is basically to bring different relevant news stories that come to market to you all basically on both sides of the issue, really kind of an unbiased perspective. I feel like often from an employer side, you all hear from your broker, you hear from your carrier, and that's definitely one great point of view. We also want to make sure we paint all sides of the picture, so everybody sees and hears every side of the issue. The Justice Department filed an antitrust lawsuit challenging United Health Group's $13 billion acquisition of Change Healthcare as background. UnitedHealthcare is obviously the behemoth, they're a $300 billion dollar insurance carrier, one of the largest in the country, covered around 45 million people. Optum, as you all know, is an entity under UnitedHealthcare providing a number of different services ranging from claims processing, PBM services, and a number of other different things. And so Change would then become a part of Optum. Change, on the other hand, as you all know, Change is famous, especially in Nashville. Change is basically famous. They're one of the original pioneers of electronic data exchanges and interfaces, claims processing, et cetera. They really brought technology and the digital aspect into healthcare. Weller, anything you'd add on United or on Change?Weller Emmons: Yeah, I mean, you mentioned about United being one of the largest health insurance in the U.S., but it's also one of the largest companies in the world. $300 million dollars, $300 billion dollars, sorry, in revenue makes it a top 10 company in the world in terms of revenue. It's behind. Some notable people are noble companies such as Amazon, Apple, Walmart, a few oil companies, and then there's United Health right there. I mean, it is a absolutely behemoth and has all kinds of data from their various operations. And change is a behemoth in its own right. Obviously its focus is a little bit more narrow in claims processing, but it has about 7% market share of the claims processing world. So it is, it's a behemouth right there in that own little niche, which is, again, itself is big, but maybe not quite to the scale of United Health big.Brian Freeman: And so just real quick background on Change in claims data processing. Basically if Weller were to go to the hospital he has a hip replacement, there's going to be claims that follow through, let's say Blue Cross, Blue Shields, his insurance company, the claims that flow through will then flow through a network of claims processors to make sure the physicians paid, the hospitals paid and that Weller actually pays his bills, et cetera. And so that's kind of how the claims processing arm works.Weller Emmons: So Brian, how does that relate back to the insurance company to Blue Cross Blue Shield? Do they outsource all their claims processing?Brian Freeman: Yeah, great question. For the most part, it's an independent third party. Sometimes they'll own their claims processor avail the name of the one for Blue Cross, Humana that processes a lot of their claims. But it also gives that carrier, to your point, phenomenal insight basically into the rates that are charged, who's paying which amounts from physicians to hospitals, labs, et cetera.Weller Emmons: So earlier you said validities who Blue Cross Blue Shield uses, and I mentioned that change has about 7% the market. Who else is using them off the top of your head that you know of?Brian Freeman: From Change? Yeah, great question. They're probably, I'd say 500 different medical carriers in the country arranging from the big guys all the way kind of down to the teeny, tiny small ones. Some of the Blue Cross claims will flow through there as well. It's interesting, some claims throw through multiple exchanges, et cetera. So just a vast array.Weller Emmons: So just to help our listeners understand what's really occurring is that all these medical claims, regardless of who your insurance carrier could be, they're kind of all flowing or could potentially flow into Change Healthcare, correct?Brian Freeman: Yeah, absolutely. Giving them insight into pricing and how patients move through the system.Weller Emmons: And so now we have United Health who themselves is a very large carrier, is attempting to buy Change and potentially all of its data resources. And again, all those data resources are data resources coming from other carriers, correct?Brian Freeman: Yeah, absolutely. All right. So on that note, Weller, if you're the Justice Department, why would you allow this to go through? Why does this actually this transaction make sense to you?Weller Emmons: I'll actually take the counter first. Why would I wouldn't let go through. So as we were saying before, if United Health acquires Change and Change has access to data points from all these other carriers, then it provides UnitedHealth with a competitive advantage. And some may say it too far of a competitive advantage and that they can theoretically view all the claims processing that's happening by all the other insurance companies. And knowing that information, it gives UnitedHealthcare a information advantage when they negotiate with healthcare providers on every two or three year basis where the contract rolls over. And just to help further educate the listeners, every couple years a hospital or healthcare provider will negotiate with the insured insurance companies for reimbursement rates. And those are usually very contentious debates and subject to a lot of legal leads. But having insight into what's going on within the patient population, the types of medical claims, the competitive rates of other insurance companies would provide healthcare with a very large advantage during that negotiation.Brian Freeman: Weller, and so that's assuming there's not a firewall in between Optum and United, is that right?Weller Emmons: Correct. In which there is a firewall in place, so that may prevent it, but I think the people who are against this acquisition would say, is that firewall really in place and is it really effective? Or what leaks are there through the firewall <laugh>?Brian Freeman: So opponents of this merger would claim that it could potentially give Change and Optum and United basically an unfair advantage in terms of pricing advantage, insights and kind of cornering the claims processing market. Is that about right?Weller Emmons: Yeah, and the kinda end impact to consumers is usually the healthcare companies are your advocates and healthcare pricing. So if you're a United person, this may actually be a good result for you if it goes through, cause United would have better information when going to the negotiation table and thus better negotiate on your behalf.Brian Freeman: Absolutely. All right. So let's take the other side of the argument. Why would this be a good thing for you? So you referenced potentially there United kind of having more leverage and negotiations on your behalf, maybe drive lower prices. What are some other benefits that could occur there?Weller Emmons: So having increased data as we all know is a key advantage for any kind of company. And we have increased data, you gain more efficiencies, more insights it helps you optimize your network construction. So there's a lot in there that could better optimize UnitedHealthcare's model as well.Brian Freeman: And to your point, working with these data sets in the past and being able to see patient records as they transition from one care setting to the next, having all that information in one place is incredibly beneficial for the patient, the employee and it can help carrier better navigate your care. So there's certainly benefits on that side as well.Weller Emmons: Yeah, I mean, when we are with our former company tracking patients longitudinally across not only our own company but across other companies, just to look at their health records was always an extreme challenge, if not downright impossible in some cases. So having the ability to track someone from their first entrance into the healthcare market all the way to their completion of that episode of care would be super valuable information and provide higher quality care in the long run.Brian Freeman: All right. So from a crystal ball perspective, how do you think this plays out over the next six to 12 months as well as what do you think would've occurred if this would've taken place, let's say two, three years ago?Weller Emmons: So kind of the same answer I don't think this deal will go through.Brian Freeman: Alright.Weller Emmons: So I'll lean a little bit more on the political side here. So the Biden administration has been notably more notably against acquisitions, especially things that start to French onto the antitrust area. And that's probably been more of a tenant of Democratic party in general, but I'm not going to go quite there. But cause I think there's some key power players in the administration who are notably antitrust individuals. So Kamala Harris, when she was the Attorney General in California was known for blocking some M&A activity in the hospital space in California. And then of course Senators Warren and Sanders have a pretty big influence right now in the Democratic party and both are known antitrust people. So I think you got some role power players in the administration who are in general against any kind of antitrust behavior. And this to me would seem something that would pique their interest as being not antitrust.Brian Freeman: All right. So thinking about antitrust literally from an analytical perspective, what is HHI? Can you do that?Weller Emmons: Oh man, that's the old one is Herfindahl-Hirschman Index. HHI is a it's a way to analyze market share in a given market to understand the fragmentation of the market. So without going into the mathematical formula of it.Brian Freeman: Which I bet you probably could, just to be . . . Weller Emmons: Honest it's actually pretty straightforward. We're not going to go there. I promise guys, this is not a math podcast.Brian Freeman: So from an HHI perspective let's see, you're still a cable company. Do they have a high concentration, low concentration . . .Weller Emmons: High concentration. There's only a handful of cable companies really from a national perspective. There's much of the little small players who have very small market share, but the vast majority of the cable networks in America are, it's owned by Comcast, Xfinity. Again, I don't know the math off my head, but I'd imagine their HHI index would be like above 0.5. Sure would be really, really high.Brian Freeman: And that gets to close to a monopoly. And then what's something with the low HHI?Weller Emmons: Fast food would probably be a low HHI. There's all kinds of competitors in that market. McDonald's is the largest. I mean, I'd be shocked that they had more than 15% market share across the fast food industry.Brian Freeman: Yeah, absolutely. And so that's in essence what the Justice Department is looking at is basically that HHI number to see where that falls, where this transaction falls. And it's interesting to see what do they include in here and what will they not include? Will they look at just the claims processing segment or will they look at overall power? Basically the insurance companies half of the space. It would be kind of fascinating to see how it plays out.Weller Emmons: Yeah, and the Department of Justice has a lot of in-house people who study the HHI and other economic indicators to understand how antitrust this acquisition would lead to whether it increases prices to consumers, which is usually kind of their final kind of criteria they use when looking at antitrust cases. So there's a lot of analysis that'll come out of this that the public may or may not have access to in the end run, but I think it'll be fascinating to see how it plays out over the next few months.Brian Freeman: All right. Well, good deal. Weller, thank you for talking to it. It'll be fun to see you, and we'll circle back with an update, I'm sure on this the coming months.Weller Emmons: Awesome. Thank you for having me.Abbey Dean: Well, that wraps up the very first episode of This Week in Benefits. Thank you all for listening. Please subscribe and be sure to leave us a voice message too. If you have questions or you'd like us to cover certain news stories, we would be happy to do so. So just give us a ring. In the meantime. Until next week, I will talk with you soon.Thank you for listening to this week's episode of This Week in Benefits, brought to you by Mployer Advisor. Mployer Advisor is changing the way employers search, evaluate, and select insurance brokers. Our intuitive platform connects employers and employees to get great benefits and insurance plans by providing employers with actionable data to easily evaluate and select the best advisor for your company's specific needs. To learn more about Mployer Advisor and our suite of products, please visit our website at mployeradvisor.com and tune in next time. Thanks.

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