The two major proposed mergers in the health insurance sector – Aetna-Humana and Anthem-Cigna – should trouble providers and consumers, because evidence suggests health plan consolidation is bad for patients, said panelists during a May 2 executive briefing at the AHA annual meeting.
“The national landscape shows steady consolidation” that can lead to higher premiums as health plans exercise market power over purchasers, said Leemore Dafny, director of health enterprise management at Northwestern University’s Kellogg School of Management.
Although studies have found that greater plan concentration has given health plans the necessary bargaining power to negotiate lower provider prices, “there is little evidence that these savings are then passed through to consumers in the form of lower premiums,” Dafny said at the briefing on how health plan consolidation affects hospitals and patients.
Dafny, who has studied extensively large insurance transactions, reported that, after two previous large insurance deals closed, premiums increased by 7% for Aetna-Prudential and nearly 14% for United-Sierra.
The mergers of Aetna and Humana and Anthem and Cigna would reduce the number of publicly traded health insurance giants from five to three. The deals would mean that these three insurers would cover more than 131 million people, about two out of every five Americans with health insurance.
The AHA has raised serious concerns about the proposed mergers in testimony before congressional antitrust committees and letters to the Department of Justice (DOJ), saying they would result in higher costs and fewer choices for consumers. The AHA has testified that the proposed mergers “merit the closest scrutiny” from the DOJ’s Antitrust Division and Congress.
“The unprecedented level of consolidation that these deals threaten could make health insurance more expensive and less accessible to consumers,” said AHA board member Thomas Miller, president and CEO of Quorum Health, who moderated the briefing. “We are also very concerned that these deals could hinder the momentum that hospitals have established to move the nation’s health care system forward.”
Antitrust experts Douglas Ross, partner at law firm David Wright Tremaine, and Washington, D.C. attorney David Balto, expressed skepticism that DOJ could rely on the structural remedy of divestiture because the mergers affect so many beneficiaries in highly concentrated markets throughout the country.
A handful of targeted divestitures isn’t likely to remedy potential anticompetitive problems raised by the mergers, Ross said. “With hundreds of markets at issue, divestiture would be problematic,” said Ross, who expects a DOJ decision on the mergers later this year.
Balto cited recent studies that show previous divestitures in insurance mergers did little to maintain competition in Medicare Advantage markets because many divested entities failed. He said DOJ should block the proposed transactions.
He also noted that Assistant Attorney General William Baer, testifying March 9 before a Senate Judiciary subcommittee, described the two pending transactions as “transformational mergers in a number of markets.” Baer testified that the proposed mergers were a “game changer that demands merger law enforcement officials to scrutinize very, very carefully.”