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Health Insurance Mega-Mergers: The Next Change in HealthCare?

I hope you are paying attention.  Some of the largest health insurers are looking to merge -Anthem and Cigna and Aetna and Humana.  Doctors and hospitals are fighting against this because they expect it will result in a reduction in their fees. Insurance companies are pursuing the mergers as a way to save money and create cost effective programs. What’s  best for consumers? I don’t know, but let’s hope the Dept. of Justice gets this one right.

On November 18, 2015, the Huffington Post published an article about the growing clash emerging with The American Medical Association (AMA) and American Hospital Association (AHA) on one side and the largest health insurers on the other.   The AMA is recommending the Department of Justice forbid two pending deals that would combine Anthem and Cigna into one company and Aetna and Humana into another.   “The AMA has concluded that these mergers are likely to impair access, affordability and innovation in the sell-side market for health insurance, and, on the buy side, will deprive physicians of the ability to negotiate competitive health insurer contract terms in markets around the country. The result would be detrimental to consumers,” AMA CEO James Madara wrote in a 17-page letter to William Baer, the assistant attorney general for the Department of Justice Antitrust Division.

Congress has held hearings on the deals, and Democratic presidential candidate Hillary Clinton has expressed skepticism.  Previous research indicates premium increases typically follow mergers between health insurance companies.  Given the dysfunction in Washington, it is likely that the only way that these deals get blocked is through the DOJ Antitrust Division.

The changing landscape of American health care raises the question of whether or not the consolidation of health insurers will be detrimental to consumers.  Health insurance companies counter that these mergers are critical to their financial future and that consumers will benefit as economies of scale enable the combined firms to cut expenses and offer more programs designed to reduce costs and improve health care quality.   “We will deliver for consumers by operating more efficiently to reduce our own costs, while enhancing our ability to manage the cost drivers that negatively impact affordability for consumers,” Anthem spokeswoman Jill Becher wrote in an email.   Health insurers point to the large premium increases approved in many states for the 2015-2016 enrollment period as proof that lower costs through size is essential to health care cost containment.     Doctors, however, are convinced that a large chunk of potential cost savings will come from a reduction of their fees.

It seems to me, this trend in health care reform has not yet addressed doctors’ fees, which are believed to significantly favor surgeons and specialists over “front line” internists and general practitioners.   As competition becomes less and less of a factor in constraining health care costs, a logical way to offset this would be to reform Obamacare in the following ways:

  • Establish a Public Option to compete with the private insurers
  • Permit Medicare and Medicaid (plus this new public options) to negotiate prices just like private insurers do
  • Legalize buying FDA approved prescription drugs from anywhere in the world

In a saner Washington, members of both parties may well agree that this would put a new source of pricing pressure into the US health marketplace.   The problem is that such reforms are impossible as long as a sizable percentage of Republican elected officials are more interesting in abolishing Obamacare than reforming it.   I am convinced that repeal without a strong replacement will create chaos that will produce all losers for a considerable period of time.    To lower costs, a predictable healthcare system that evolves with new efforts to contain costs is essential.   In that first “honeymoon” year of our next President, my hope is that he or she will make the creation of an effective and creative   bipartisan health reform alliance a major priority.  If that fails, a growing percentage of the middle class will find that, even with insurance, they will not be able to meet the increased costs for many of their health care needs.

 

Robert M. Hoyt, Ph.D.

Allied Health Professionals, LLC

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