The Obama administration’s top health official highlightedthe importance of competition to insurance markets, asthe Justice Department is poised to decide on two massivedeals among four of the health-plan industry’s biggest players.

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Health and Human Services Secretary Sylvia Mathews Burwell saidcompetition among insurers can reduce costs that consumers face andimprove the quality of their health coverage. She declined tocomment on her department’s view of Aetna Inc.’s proposed purchaseof Humana Inc. or Anthem Inc.’s deal for Cigna Corp. If bothmergers are completed, the industry’s five largest companies wouldbe reduced to three.

“When there is competition, that creates downward pricepressure, and it also creates upward quality pressure,” Burwellsaid in a brief interview in Fort Dodge, Iowa. “We’ve alwaysthought and talked about why competition is an important part ofthe overall picture, and that’s not just in the marketplace butoverall for the nation in terms of our health care.”

Pushing Obamacare

Burwell traveled to Iowa to highlight how the Patient Protectionand Affordable Care Act, also known as Obamacare, has improved carefor Medicare patients. The act, one of President Barack Obama’ssignature domestic policy accomplishments, has extended healthinsurance coverage to about 20 million people, primarily byexpanding eligibility for Medicaid and creating new markets whereindividuals can buy health plans, often with subsidies. The mergerreview gives the administration another chance to help guide thefuture of U.S. health care.

Those new markets, known as exchanges, rely on private insurersto offer health plans. The Obama administration has had to contendwith companies including UnitedHealth Group Inc., the largest inthe industry, exiting many markets after suffering losses. Thepresident wrote an article published this week in the Journalof the American Medical Association suggesting that a so-called“public option” or government-run health plan could help increasecompetition in some markets.

“More can and should be done to enhance competition in themarketplaces,” the president wrote. “Congress should revisit apublic plan to compete alongside
private insurers in areas of the country where competition islimited.”

Burwell said Friday in an interview in Des Moines thatthere are some markets where competition is “challenging,” withoutnaming them. She said competition can foster innovation and createa healthy balance in negotiations among doctors, hospitals andinsurers.

“Competition needs to be at a provider level and needs to be atan insurer level,” Burwell said. “When there’s competition in bothsettings, that creates an even playing field for both sets ofplayers.”

Antitrust scrutiny

While the Obama administration hasn’t publicly signaled how itviews the mergers, the Justice Department’s No. 3 official has saidhe’s taking a close look at the health insurer deals, which he hascalled a “game changer.” The official, Bill Baer, has stopped astring of mergers during his tenure, including Halliburton Co.’sproposed takeover of Baker Hughes Inc., which would have combinedthe second- and third-largest oil-services firms in theindustry.

Related: Insurers warn of PPACAsustainability

In June, Baer told a group of antitrust lawyers that combiningthe country’s largest health insurers would lead to “substantialconsolidation” in the industry, and antitrust enforcers “cannotafford to let up.”

Burwell’s department can weigh in on the deals with the JusticeDepartment, which has the final say on whether to attempt to blockthe deals because of their impact on competition. Burwell declinedto comment on those discussions. “We support as asked,” shesaid.

Employer market

Federal antitrust officials at the Justice Department arereviewing Aetna’s proposed $37 billion takeover of Humana andAnthem’s $48 billion bid for Cigna. The combination of Anthem andCigna would create the biggest U.S. health insurer by membership,topping UnitedHealth. Together, the firms would have a largeposition in the market for coverage sold to big companies and otheremployers.

Aetna’s bid for Humana would allow the buyer to expand in themarket for private health plans for the elderly, called MedicareAdvantage. Humana is already a leader in Medicare Advantage and thecombined firm would be by far the biggest in those policies.

The Justice Department has told Anthem that the Cigna dealthreatens competition and that selling parts of the businessprobably wouldn’t sufficiently address that issue, people familiarwith the matter said last month. That raises the possibility thatthe U.S. will sue to block the merger, which may lead the companiesto a court fight or push them instead to seek deals with other,smaller insurers.

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