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Panel Examines How Health Insurance Consolidation Will Affect Hospitals and Patients

A panel of experts at the American Hospital Association’s Annual Meeting examined the likely impact of the proposed health insurance mergers of Anthem-Cigna and Aetna-Humana. They concluded that the mergers will harm consumers, doctors, and hospitals, and recommended that interested parties work to block these acquisitions.

The first speaker, Doug Ross, provided background information on the transactions. He stated that antitrust authorities should be asking themselves two questions: will these mergers benefit consumers? And will these mergers harm providers?

The Anthem-Cigna deal will have the greatest impact on fully insured and administrative-services-only (ASO) plans, while the Aetna-Humana merger’s greatest impact will be in the Medicare Advantage market. Should the latter merger proceed, the combined Aetna-Humana corporation will be the largest Medicare Advantage insurer in the country. The American Hospital Association and its state affiliates have written numerous letters to the Department of Justice, State Attorneys General, and State Insurance Commissioners drawing attention to the resulting concentration in health insurance markets. In over over 600 counties, the transactions will lead to a post-merger HHI of over 2,500 in the health insurance markets, and therefore they are presumptively anticompetitive.

Mr. Ross concluded with a summary of how hospitals and medical groups could assist regulators in their work. He noted that the Department of Justice and other authorities are speaking with experts, employers, consumer advocacy groups, and providers. They are looking for concrete evidence that the mergers will be anticompetitive and harmful. Hospitals can help them by providing examples of harm resulting from previous mergers, whether in the form of higher premiums for consumers, lower reimbursements for hospitals that inhibited their ability to provide care, or negative effects on services or healthcare quality. The Department of Justice will either approve the mergers, block them, or require conditions, but this will not take place for several more months.

Professor Leemore Dafny spoke next about the broader trend of increased health insurer consolidation. This subject is relevant for all Americans—two out of three non-elderly American purchase private health insurance. Although it has been difficult to find concrete information, the health insurance landscape shows steady consolidation over time. In 2002 the top four insurers of commercial lives possessed 65% market share, but in 2014 they possessed 83% market share. Local markets are even more concentrated, especially in certain states. Medicare Advantage is somewhat less affected, but the proposed merger of Aetna and Humana would dramatically change that.

Several reasons are responsible for this trend over the past decade. First, a series of local mergers occurred that resulted in large companies. Second, entry into health insurance markets is tricky, and has become more difficult in recent years. Third, antitrust enforcers generally did not object to mergers unless they were especially egregious, and few public concerns were raised. Professor Dafny noted three key points: there is no evidence that mergers lead to savings that are passed on to consumers, healthcare costs and premiums almost always increase when companies merge, and while research on mergers and innovation is scarse, a few studies show that such acquisitions lead to reduced benefits and less product variety.

Antitrust lawyer and counsel for the Coalition to Protect Patient Choice David Balto spoke last. He stated that “we are in a new era of antitrust enforcement” and cited Assistant Attorney General Bill Baer’s promise to carefully scrutinize insurance mergers to ensure they would not harm consumers. When challenged by the California Insurance Commissioner to explain the benefits of the mergers, the CEOs of the merging companies responded with evasions or silence. In this situation, consumer interests and provider interests are the same.

Consumer groups have banded together and are working to oppose these deals, especially at the state level. State Insurance Commissioners have sweeping powers to block the mergers or to impose conditions, even if the Department of Justice approves them. David reviewed the Coalition to Prevent Patient Choice’s activity in many states, and emphasized that remedies will not solve the harm resulting from these acquisitions. He concluded by saying that Missouri, Virginia, Delaware, Colorado, Connecticut, and New Hampshire will be holding hearings on the mergers, and urged the audience to voice their concerns and opposition.

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