The pending mergers of Aetna with Humana and Anthem with Cigna have birthed an impressive coalition of powerful industry groups who oppose the mega-deals. Physicians and hospitals were the earliest opponents, and now consumer groups have united to oppose the combinations on the grounds that such massive insurer consolidation is likely to hurt the consumers of health care.
Joining the American Medical Association, American Hospital Association, American Association of Family Practitioners and other provider groups is a coalition of consumer and labor groups, led by the Consumer Federation of America, called the Coalition to Protect Patient Choice. All are trying to convince the U.S. Department of Justice to disallow the mergers on the grounds that the combinations are likely to severely reduce competition.
The Coalition to Protect Patient Choice cites two relatively recent studies (from 2012 and 2013) on the effects of insurer mergers, increased concentration, and its effect on premiums. Both studies, available on the coalition’s website (theCPPC.com), find evidence that insurer concentration due to mergers accelerates premium inflation.
About 150 million consumers are covered under employer-sponsored group insurance, and most of them have little choice over their carrier and have been paying an ever-larger portion of their premiums and medical costs in recent years. As these working Americans’ earnings have flatlined, their health insurance premiums have increased–many have been told by their bosses that the cost of health insurance has eaten up any potential surplus for wage increases.
Consumers also perceive that their insurance coverage has become flimsier: with high deductibles, exclusive networks and ugly copay surprises at the pharmacy counter. And while there’s much that average consumers don’t know about health care, they can easily perceive that having fewer, more powerful insurance behemoths is not likely to work in their favor.
The AMA was the first to oppose the mergers. The nation’s largest physician lobby group provided early analyses of the already high degree of concentration in the commercial and Medicare Advantage insurance market. That analysis, based on data from DRG, showed the mergers would dramatically worsen insurer concentration nationwide.
More recently, the AMA has called on government regulators to examine the effects of past insurer mergers on insurance premiums, competition and consumer choice. But while such studies are instructive, there are no past mergers that come close to the scope and impact of the ones now contemplated, and none have taken place in the new post-ACA marketplace.
The American Hospital Association is likewise in opposition, concerned about the monopsony purchasing and price-setting power that can be exercised by health plans over hospitals and health systems. Dominant health plans can dictate the contract terms and prices for health care in their local markets, and in some markets the mergers would create a more viable insurer competitor to challenge the local dominant plan(s).
But dominant health plans’ take-it-or-leave-it contracting power exists in many markets now, and has become more intense as insurers have designed selective low-cost networks that include only the lowest-cost providers in a local area. Narrow-network contracts can use the threat of network exclusion to control referral patterns, change physician prescribing, discourage use of diagnostic tests, and pressure physician groups to accept risk-based contracts that provide a monetary incentive to limit care.
The only major interest group in the health insurance constituency that has not taken a side on the mergers is employers. For most employers, the idea of having fewer health insurers to choose from is not an attractive one. In most urban markets, employers seeking small group policies have perhaps three carriers to choose from now – the local Blue plan, and one or two of the nationals. If they’re lucky, they may have a regional hospital-based competitor in the mix. In smaller markets, the Blue plan may be the only carrier option. The premium prices are steep, and many of the more affordable products feature high deductibles and cost-sharing that act as a barrier to care for members.