Hawley and Warren Introduce “Break Up Big Medicine Act” to Force Separation of Insurers, PBMs and Providers

Bipartisan bill modeled on the 1933 Glass-Steagall Act would require health care conglomerates to divest vertically integrated subsidiaries.

Today, Senate ideological-opposites, Sen. Josh Hawley (R-Mo.) and Sen. Elizabeth Warren (D-Mass.), introduced the Break Up Big Medicine Act, a Glass Steagall Act for health care. From the right, Hawley has built a reputation as a populist critic of corporate exploiters. From the left, Warren has spent years hammering Wall Street and Big Tech for their grip on markets. Together, their new bill aims at the corporate, monopolistic conglomerates that now control much the U.S. health care system — particularly where Big Insurance and its subsidiaries blur the lines between health delivery and Wall Street calculations.

At its core, the legislation prevents common ownership of a medical provider organization and one or more of the following: an insurance company, pharmacy benefit manager (PBM), or a prescription drug or medical device wholesaler. The bill requires individuals who currently own, operate, or control both types of entities to divest from one category (either the provider organization or the insurer, PBM, or wholesaler) within one year of the bill’s enactment. Failure to do so would result in penalties and enforcement from the Federal Trade Commission.

Why “Glass-Steagall for Health”?

The original Glass-Steagall Act was enacted in June 1933 during the Franklin Roosevelt administration. Congress and Roosevelt believed it was imperative to break up the risky entanglement of commercial and investment banking, which contributed to the 1929 stock market crash that led to the Great Depression. Millions of Americans lost their life savings when thousands of banks failed and confidence in the country’s financial system collapsed. The Glass-Steagall Act helped separate banks from speculative securities operations, established the Federal Deposit Insurance Corporation (FDIC) to protect depositors and for decades served as a regulatory firewall that protected Americans’ savings.

In recent years, health insurers have morphed into Wall Street-controlled bank-like institutions that bear little resemblance to the nonprofit organizations most of them were just a few years ago. In fact, many of the country’s biggest health insurers are essentially financial institutions that also own a health insurance company.

Today’s major players are not just covering (and not covering) our health care costs — they are amassing profits across a sprawling set of subsidiaries that have mutated these health insurers into monopolistic corporations similar to the “trusts” Franklin Roosevelt’s cousin Teddy ordered broken up and to the vertically integrated banking titans of the 1920s.

For example:

• UnitedHealth Group, owner of UnitedHealthcare (a health insurer), also owns Optum Bank (which has more HSA assets under management than any other financial institution), Optum Ventures, Change Healthcare, PBMs, speciality pharmacies, and over 2,000 medical provider organizations;

• CVS Health operates both insurance products (through Aetna) and PBMs (through Caremark) and owns a major pharmacy retail chain that shapes prescription pricing and competition;

• Cigna has been bringing in far more revenue from the pharmacy supply chain since it bought Express Scripts in 2018 than from its many health plans; and

• Elevance, which operates Blue Cross plans in 14 states, also owns a PBM, clinical operations and, like UnitedHealth, a financial institution with millions in HSA assets under management.

The joint ownership of insurance companies, PBMs, medical provider organizations, and pharmacies allows the parent companies to game a little known regulation called the medical loss ratio (MLR). The ACA requires that insurers have MLRs of at least 80-85%, meaning they must spend 80-85% of premium dollars on medical care. When insurance companies own a PBM, a provider group or pharmacy, they can count premium dollars they “spend” with to those entities as “medical care” for purposes of the MLR, when in reality they are self-dealing – and often inflating the amount they pay their affiliated providers to meet the MLR requirements and avoid sending rebates to their customers for noncompliance. As a consequence large health care conglomerates have little if any incentive to contain costs. The self-dealing actually drives costs higher while enabling them to convert more premium dollars to profits than Congress intended when it included the MLR provision in the Affordable Care Act.

Taken together, Big Insurance profits from vertical integration by pooling their subsidiaries’ reach and capital, investing in and paying themselves and influencing the cost of and access to care for millions of Americans throughout the health care ecosystem.

The fact that Hawley and Warren are uniting on this important legislation is reflective of the broader national conversation about the nation’s health care affordability issue, which has created a medical debt crisis that a broad-swath of Americans now blame on Big Insurance.

Warren and Hawley recognize the critical importance of structurally separating companies within our health care system to protect patients and make prices more affordable.

The original Glass-Steagall Act was passed after many banks had already become insolvent. The Break Up Big Medicine Act could prevent a similar catastrophe.