It didn't take long for hearings on the mega.m.erger between Pennsylvania's health insurance bookends, Pittsburgh-based Highmark and Philadelphia's Independence Blue Cross, to turn up bad news. Try day one.
During the first day of testimony called by Sen. Arlen Specter, in Philadelphia on Monday, Pennsylvanians learned that about 1,000 jobs would be lost in the consolidation and that competition among health care plans might also decline. Although neither claim was a shock to those who oppose the merger, the reality of each looms larger when validated by an authoritative voice.
No less an insider than Highmark CEO Kenneth Melani said the merger of the two insurance companies could cost 1,000 jobs, mostly through attrition. That would amount to about 3.5 percent of the insurers' total work force. No surprise there; any corporate merger is likely to pare personnel. The question is where will the ax fall (as in Pittsburgh or Philadelphia) and how will the savings be spent? To reduce insurance premiums for consumers? To fatten the companies' combined $4.6 billion surplus? Or to increase executive pay at the "nonprofits," like Mr. Melani's $3.2 million last year?
While some efficiencies might be wrung out of the merger, less competition could also result, according to a professor of health care management from the Wharton School at the University of Pennsylvania. Lawton R. Burns said that "in the managed care field, an increase in the number of competitors is associated with lower health-plan costs and premiums; conversely, a decrease in the number of competitors is associated with increases in plan costs and premiums."
Highmark and Independence both deny the loss-of-competition charge and even said that in the long run new jobs would be added, but the fact that the merged entity will have cornered more than half of Pennsylvania's insurance market and become the third-largest health insurer in the country speaks for itself.
Unfortunately, Pennsylvania is not well-positioned to respond to this titanic threat. Gov. Ed Rendell, who attended the hearing along with U.S. Sen. Bob Casey, has let the insurance commissioner's job go vacant. Also, Pennsylvania law does not allow the Insurance Department to review the mergers of not-for-profit insurance holding companies. Some lawmakers want to change that, though, retroactive to the beginning of 2007, and we encourage their efforts.
Only through tough scrutiny on behalf of the public - by the U.S. Senate Judiciary Committee, by the General Assembly, by the state attorney general and by the U.S. Justice Department - can the state learn the real impact of this merger on the rising cost and less-than-universal coverage of health insurance in Pennsylvania. Now is the time for hard questions and effective oversight. Now we'll see if government truly works for the people.
State Auditor General Jack Wagner has announced a performance audit of the Pennsylvania Higher Education Assistance Agency. We are hopeful this audit will go beyond headline-making into a true government watchdog look at the fiscal operations of PHEAA, the state's college-loan agency.
What we know so far does not strike us as the "efficient business operation that is intensely focused on helping Pennsylvania families achieve an affordable higher education," the description PHEAA chief executive Richard Willey gave of his agency Tuesday.
Willey's $470,000 in salary and bonuses for 2005 - the latest available - made him one of the highest-paid employees of state government and related agencies.
Documents that took media outlets 19 months to get uncovered hundreds of thousands of dollars being spent by board members, staffers and guests on trips to exclusive resorts as far away as California from 2000 to 2005. We wonder if the students and families seeking loans for a college education consider the above details efficiency in action.
The PHEAA board, which includes 16 state legislators, recently approved new limitations on travel expenses and employees. A new policy limits board members to per-diem reimbursements set by the Internal Revenue Service instead of being reimbursed for the full cost of their lodging and meals. Employees are now prohibited from charging the agency for limousines and are required to use the lowest-priced rental cars available.
Wagner says the audit, which will examine fiscal operations back as far as July 2004, will take months to complete. That's fine. As long-overdue as this audit is, we'll wait.
A state Senate committee has been gathering testimony around the state, including at a hearing in Philadelphia last week, on the possibility of holding a convention with as many as 150 citizen-delegates.
These elected delegates would consider amending the state constitution to, for example, cut the size of the legislature, impose term limits on legislators, or to allow "initiative and referendum" ballot questions in Pennsylvania (much like Propositions A through Z for which California has become so notorious).
Calls for this grassroots revolution grew louder after the legislature's scandalously self-serving pay-raise vote in July 2005. Neither the subsequent repeal of the pay raise, nor the election last November of 54 new legislators, has derailed the idea of a convention.
"There is a disconnect between the people of Pennsylvania and their government," said state Sen. Jeffrey E. Piccola, R-Dauphin, chairman of the state government committee.
The yearslong process of organizing a constitutional convention could very well end up covering some of the same ground of reform that the legislature is now plowing.
A bipartisan panel appointed by Speaker Dennis O'Brien, R-Phila., already has enacted some rules to make the House more open and less vulnerable to the whims of party leaders. Having completed those "inside baseball" changes, the speaker's commission is now turning to reforms that the public should appreciate more.
The panel will hold three hearings on term limits, campaign finance limits, the size of the legislature and the state's open-records law. Some of these topics, if they turn into proposals, would take the form of amendments to the state constitution.
The panel will meet in Philadelphia at 9 a.m. April 26, in Room 202 of the Convention Center. Anyone who can't attend is invited to send suggestions to reform@speakerobrien.com.
This House commission, co-chaired by Reps. Josh Shapiro, D-Montgomery, and David Steil, R-Bucks, has been diligent and has stuck to its promised schedule. It has accomplished a considerable amount since January. Last week, the panel approved a plan to select half the members of the House Ethics Committee randomly, rather than having them chosen by party leaders.
It's more proof that the spirit of change, ushered in by voters last fall, is still active inside the Capitol. That process should be allowed to play out for a few more months.
Critics of allowing the legislature to propose amendments to the constitution say it's a time-consuming procedure. A proposed amendment on term limits, for example, would need to be approved in two successive legislative sessions. The earliest it could come before voters would be November 2009.
But a constitutional convention is not exactly a swift vehicle of reform, either. Piccola said if the legislation that he is drafting gets approved without delay, the earliest a convention could be held would be January 2009.
Another potential pitfall with a convention is its scope. Piccola envisions a gathering in which hot-button issues such as gun control, abortion and the death penalty would be off-limits. But his committee vice chairman, Sen. Michael Folmer, R-Lebanon, said a constitutional convention was the only way to address "pressing issues," including "tort reform," a perennial target of conservatives.
"It's an expensive, long, drawn-out and uncertain process," said Robert Williams, a professor at the Rutgers University School of Law in Camden. "Be careful what you wish for."
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