AMA voices concern over insurance mergers
The combined impact of proposed mergers among four of the nation’s largest health insurance companies would exceed federal antitrust guidelines designed to preserve competition in as many as 97 metropolitan areas within 17 states, according to new special analyses of commercial health insurance markets issued by the American Medical Association (AMA).
For these locations, the mergers would enhance market power. According to the US Department of Justice, ‘a merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation, or otherwise harm customers as a result of diminished competitive constraints or incentives’. According to the AMA, the mergers would also raise significant competitive concerns in additional markets. All told, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states. “A lack of competition in health insurer markets is not in the best interests of patients or physicians,” said AMA President Steven J. Stack, MD. “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.”
At the same time, Rick Pollack, president and CEO of the American Hospital Association, gave evidence to the Subcommittee on Regulatory Reform, Commercial and Antitrust Law of the US House of Representatives, on the topic of health insurance mergers, in which he stated: “Those deals [Anthem/Cigna and Aetna/Humana] appear motivated by top-line profits. The market concentration threatened by the pending insurance deals is large and durable, and consumers and providers are at risk if the deals are allowed to move forward. The two deals promise fewer choices for consumers for commercial insurance and Medicare Advantage (MA) plans, narrower networks of providers in what few choices remain, and higher premiums and/or out-of-pocket costs, among other things. Even if these insurers make good on their promise to reduce costs if they are permitted to consolidate, insurers have a dismal track record of passing any of those benefits on to consumers, and there is no reason to think these deals will be different.” He went on to say that ‘commercial insurers continue to benefit financially from letting hospitals do the hard work of reducing readmissions, and improving (rigorously measured) patient quality’. He concluded: “There is no reason to believe that allowing these insurers to become even larger and more immune from competitive forces would alter their incentive to sit mostly on the sidelines and reap the considerable financial rewards of provider innovation.”
Industry response
A US Senate Judiciary subcommittee hearing was held recently, where representatives of insurers from Aetna and Anthem made their cases in favour of proposed multibillion-dollar acquisitions. Senators wanted the insurers to explain why their deals would not stifle competition, and to ensure that the mergers would not give them too much power.
“I want to make sure these deals do not harm consumers by increasing premiums or reducing benefits,” said Senator Amy Klobuchar of Minnesota, while Senator Richard Blumenthal said that he was ‘deeply concerned’ about the mergers, and that they raised ‘serious competitive concerns’.
In response, Aetna’s CEO Mark Bertolini said that ‘robust choice and competition will remain in the Medicare market’, even after Aetna acquires Humana, the second-largest provider of Medicare Advantage plans in the US. Joseph Swedish, CEO of Anthem – which is planning to buy Cigna – said that his own deal would allow consumers to benefit from expanded access to care. Generally, insurers have said that these mergers will help them save money by cutting overlapping costs and improving technology, for example in the areas of monitoring patient health and helping them find care. The acquisitions are also seen as an efficient method to push into new markets and gain negotiating leverage over care providers.
“We are not at all concerned about the lack of competition in local markets,” said Bertolini, adding that Aetna and Humana would complement each other, and that there are at least 10 other competitors in the field of public insurance exchanges in markets where the two companies currently overlap. Swedish agreed with this, using the example of a new, small insurer named Oscar that has found some success selling coverage in New York City. “There are many new players that have entered the market and continue to enter the market,” he said. Later in the hearing, he asserted that the acquisition of Cigna would help to improve care by combining the skills of two insurers that are developing new methods to reimburse care providers on the basis of quality, rather than simply setting a standard amount for each incident. Insurers suggest that this shift in focus will help to reduce costs; Swedish also said that the Cigna deal would blend the insurers’ data repositories, improving the information to which they both had access.
Also appearing at the hearing, however, was American Hospital Association CEO Richard Pollack, who warned that both of the acquisitions under discussion ‘could be a blow to millions of healthcare consumers as well as the hospitals, doctors and others who are working to improve quality and efficiency while making care more affordable to patients’.