Experts: Pending Health Insurance Mergers Will Hit Patients Right In The Wallet


Impending multi-billion health insurance mergers involving four major providers have drawn the ire of patient advocacy groups that say such deals violate antitrust laws and threaten to fatten insurance companies’ coffers at patients’ expense.

Earlier this year, Anthem, Inc. made a $47.5 billion bid for Cigna Corp and Aetna, Inc. proposed a takeover of Humana Inc. Meanwhile, UnitedHealth Group, currently the nation’s largest insurer, also approached Aetna. These deals, if they come to fruition, would create a trinity of mega-insurance companies, each one generating more than $100 billion revenue annually. Justice Department officials have geared up to examine the mergers to see if they would benefit consumers.

A study by the American Medical Association (AMA), however, suggests that may not be the case, pointing out that a small group of companies already dominate a significant number of insurance markets in the United States. The consolidation of Anthem and Cigna and Aetna and Humana, AMA representatives say, will reduce options in the market for Medicare recipients, particularly those enrolled in the private Medicare Advantage plan.

“A lack of competition in health insurer markets is not in the best interests of patients or physicians,” AMA President Steven J. Stack, M.D said in a press statement. “If a health insurer merger is likely to erode competition, employers and patients may be charged higher than competitive premiums, and physicians may be pressured to accept unfair terms that undermine their role as patient advocates and their ability to provide high-quality care. Given these factors, AMA is urging federal and state regulators to carefully review the proposed mergers and use enforcement tools to preserve competition.”


The analysis, required by the Affordable Care Act (ACA), found that the three largest insurers in more than 30 states commanded at least 80 percent of enrollment. In more than half of the states, a single provider had more than half of the total enrollees. Though hospitals acquired physicians groups, AMA said 60 percent of doctors worked with practices with fewer than 10 patients. Citing federal antitrust laws, the medical group said that further consolidation would allow insurance companies to raise prices and reduce quality the detriment of insurance holders.

This study follows the American Hospital Association’s letter to the Justice Department that scrutinizes the Aetna-Humana merger, which it described as a threat to competition in up to 154 metropolitan areas in 23 states. The Commonwealth Fund also released a study that found that the Aetna-Humana merger would drive up prices for seniors, especially since there was high concentration among nearly 97 percent of Medicare Advantage markets. A study published in a Harvard-affiliated peer review journal in August predicted that insurers would “bulk up” so that they can dominate their marketplace and raise rates without consequence.

Since the ACA’s passage, the Justice Department has challenged health insurance mergers focusing on its effect on local and regional markets. In 2010, Michigan’s Blue Cross Blue Shield reneged on its consolidation with an in-state competitor after the Justice Department threatened to block the deal with an antitrust lawsuit. In 2012, officials scrutinized Humana’s acquisition of Arcadian Management Services, Inc., a health care services company. The health companies responded by divesting its Medicare Advantage plans in 51 counties and parishes.

The future of the deals currently under question have yet to be determined. While insurers waved off criticism about the merger, saying doctors and hospitals are fearful that bigger companies would cut their payments, concerned parties say the ACA protects against premium hikes that the merger would bring.

A key tenet of the ACA centers on lower premiums via increased competition between insurers in marketplaces. Obama administration officials told the New York Times earlier this year that consumers, sensitive to price changes, reacted to a wider variety of choices by switching over to lower premium plans during the 2014 open enrollment window. That led insurance companies to keep premiums as low as possible to attract customers, as found in a county-level analysis conducted by the federal government last year that showed more moderate increases in health care premiums, compared to years past. That year, nearly 60 percent of counties had an increase in the number of the insurers offering health plans, while fewer than 10 percent experienced a decline.


Obamacare opponents say the health care law includes provisions that may have spurred the consolidation, including a requirement that insurers spend a percentage of premiums of health care, a rule that critics say forces companies to cut administrative costs by merging. GOP lawmakers wasted little time in July blaming Obamacare for proposed mergers, rehashing arguments that the insurance law would place smaller providers at a disadvantage and drive up premiums.

But an investigation conducted by the Center for Public Integrity (CPI) challenged those allegations, outlining other factors that influenced the mergers. Those causes, CPI’s Wendell Potter says, include the increasing number of Baby Boomers rushing to the Medicare rolls. In his piece, Potter also pointed to previous consolidations in the 1990s that created the current trifecta of major insurance companies and a shrinking employer-based health insurance market that has been on the decline since the turn of the century.