Policy & Regulation News

Will Insurance Mergers Drive Up Health Insurance Premiums?

By Jacqueline DiChiara

- A series of pending healthcare mergers may lessen competition and leave beneficiaries with less choice.

healthcare mergers consolidation

Aetna recently agreed to acquire Humana for $37 billion in cash and stock. The unification of two of the largest health insurers is expected to generate revenue topping $100 million, as RevCycleIntelligence.com reported.

Regarding yet another noteworthy proposed health insurance merger, Cigna rejected Anthem’s “woefully skewed” $54 billion proposal last month, as RevCycleIntelligence.com explained. Last week, Anthem announced it formally reached terms to acquire Cigna, as confirmed by Ayla Ellison and Molly Gamble of Becker’s Hospital Review.

"These two mergers involve four of the five largest payers in the nation and will greatly shift the healthcare landscape,” state Ellison and Gamble. “This consolidation at the very core of the healthcare industry may have a very negative impact on employer healthcare costs and the costs of insurance coverage. It greatly strengthens the hands of the payers vis a vis employers and vis a vis providers. It is [likely] to provide payers with greater leverage and market power with each audience,” the authors maintain.

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  • "The combined company would have about 53 million medical members, merging Anthem’s Blue Cross and Blue Shield presence in 14 states and Medicaid Amerigroup brand in 19 states with Cigna’s U.S. and global services," the organizations confirm within a press release from the American Hospital Association (AHA). "They expect the transaction to close in the second half of 2016, pending regulatory and shareholder approvals. Anthem President and CEO Joseph Swedish would serve as chairman and CEO of the combined company," AHA adds.

    AMA anticipates health insurance premiums increasing

    In relation to the aforementioned announcement, Steven J. Stack, MD, President of the American Medical Association (AMA), says competition and choice are two facets the healthcare system needs to actively support.

    “We have long cautioned about the negative consequences of large health insurers pursuing merger strategies to assume dominant positions in local markets. Recently proposed mergers threaten to increase health insurer concentration, reduce competition and decrease choice,” Stack states.

    According to analysis of health insurance markets among 388 metropolitan areas within a 2014 study from AMA, Competition in Health Insurance: A Comprehensive Study of US Markets, health insurers’ competition faces a “serious decline.”

    “[Nearly] 3 out of 4 metropolitan areas [were] rated as ‘highly concentrated’ according to federal guidelines used to assess market competition,” Stack explains. “In fact, 41 percent of metropolitan areas had a single health insurer with a commercial market share of 50 percent or more. Further AMA analysis shows that based on federal guidelines, the proposed Anthem-Cigna merger would be presumed to be anticompetitive in the commercial, combined (HMO+PPO+POS) markets in nine of the 14 states (NH, ME, IN, CT, VA, CO, GA, NV, KY) in which Anthem is licensed to provide coverage,” confirms Stack.

    If no competitive health insurance market exists, this means those few companies that remain will misuse their market power, control premium increases, and chase corporate policies that contradict the interests of patients, Stack says. “Health insurers have been unable to demonstrate that mergers create efficiency and lower health insurance premiums,” Stack explains, additionally referring to an AMA study of the 2008 merger involving UnitedHealth Group and Sierra Health Services which noted a 14 percent increase in premiums following the merger as hospitals' tangible thirst for capital rages onward.

    As RevCycleIntelligence.com reported, many healthcare experts and leaders confirm that hospital mergers and acquisitions lead to disastrous financial consequences, including higher expenditures with little concern for how beneficiaries will be monetarily affected.

    Stack similary says offering commercial health insurers virtually unrestricted authority to dominate the rather sensitive yet powerful domain of patient healthcare harms both patients and the collective healthcare system. "The U.S. Department of Justice has recognized that patient interests can be harmed when a big insurer has a stranglehold on a local market,” Stack states. “Given the troubling trends in the health insurance market, the AMA believes federal and state regulators must take a hard look at proposed health insurer mergers. Antitrust laws that prohibit harmful mergers must be enforced and anticompetitive conduct by insurers must be stopped,” he adds. 

    As the ebb and flow of dominance evolves, the healthcare industry will remain closely drawn to the changing role of health insurer mergers and what their aftermath holds within the revenue cycle bubble, and beyond.