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Published 6/1/2016
Manthan Bhatt

Health Insurance Mergers May Fundamentally Change Market

Recently proposed mergers between the healthcare giants Anthem/Cigna and Aetna/Humana would reduce the number of national health insurance providers from five to just three, spurring questions about the potential effects of reduced competition. In response, a great deal of attention has focused on whether the U.S. Department of Justice (DOJ) may block Aetna's $37 billion acquisition of Humana and Anthem's $54 billion takeover of Cigna on antitrust grounds; however, policymakers point out that health plans are typically regulated by the states, which have a broader mandate to scrutinize issues raised by the deals.

For many states, this consolidation would mean going from two or three national insurers to just one. The number of national insurers may not increase anytime soon, as creating nationwide provider networks—a requirement for larger employers—is nearly impossible for start-ups. Because of this, many consumer, physician and hospital organizations are interested in coordinating efforts to oppose these mergers on the state level.

Some physicians, on the other hand, are concerned that large-scale consolidation of health plans will decrease their negotiating leverage. Stand-alone hospitals and physician groups in crowded clinician markets already have limited negotiating leverage with insurers, often finding themselves in "take-it-or-leave-it" contracts. Recent studies have shown that 70 percent of metropolitan areas have highly concentrated commercial health insurance markets. For Medicare Advantage, a driver for Aetna's acquisition of Humana, 97 percent of markets are already highly concentrated. (See Fig. 1 for more information on potential anti-competitive results of these mergers.)

Opponents of the mergers have also questioned whether these consolidations would lead to patients being hit with higher premiums and even higher out-of-pocket costs. Two separate studies—one analyzing UnitedHealth's merger in 2008 and one studying Aetna's merger with Prudential—showed significant price increases for consumers. Merger-related out-of-pocket and premium costs for patients rose by 13.7 percent for United Health Group and 7 percent for Aetna. The CEOs of Anthem and Aetna have argued that the mergers could reduce the cost of healthcare, assertions questioned by consumer advocacy organizations.

The Coalition to Protect Patient Choice (CPPC) is taking proactive steps to block the mergers on a state level. CPPC has met with more than 20 state attorneys general and has made regulatory filings in Florida, Virginia, New York, Ohio, Delaware, Wisconsin, California, and Illinois. The group also intends to file opposition to the mergers in Colorado, Connecticut, and Missouri. Physician groups also plan to testify in most of these states and have already testified in Wisconsin and California.

How to get involved
AAOS is monitoring the situation and will be setting meetings with the CPPC, the American Antitrust Institute, and other groups to determine AAOS' role in the mergers on both the national and state level. The Colorado Orthopaedic Society and other state orthopaedic societies are already mobilizing to oppose these mergers.

For information on how to get involved in efforts to block the mergers, please contact me at bhatt@aaos.org

Manthan Bhatt is state government affairs manager in the AAOS office of government relations.