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Health insurer merger plans under antitrust fire

Health insurer merger plans under antitrust fire

Trade groups representing health care providers say consolidating four of the five largest publicly traded U.S. health insurers would reduce competition in dozens of states and possibly increase premiums.

Testifying before the House Judiciary Committee last week, senior leaders of the American Medical Association and American Hospital Association said the market concentration resulting from the proposed mergers of Anthem Inc. and Cigna Inc., and Aetna Inc. and Humana Inc. would likely drive up health insurance premiums, discourage innovation and potentially erode the quality and/or quantity of medical care available to consumers.

“In practice, the concentration of market power among a handful of nationwide insurers impacts physicians' ability to facilitate individualized care,” Dr. Barbara McAneny, a member of the AMA's board of trustees, said during the Judiciary Committee's Sept. 10 hearing on the state of competition in the health care marketplace.

An analysis of the proposed mergers that the Chicago-based AMA submitted to the U.S. Justice Department and the Federal Trade Commission earlier in the week indicated the deals would thwart competition from local and regional insurers and disadvantage employers and individual consumers in as many as 154 cities in 23 states.

“Market dominance does not produce patient benefits when physicians are squeezed and networks are narrowed,” Dr. McAneny said. “We're at a critical decision point on health insurance mergers, because once the handful of national payers is further reduced, there is simply no going back.”

Richard Pollack, president and CEO of the AHA in Washington D.C., was similarly critical of the proposed mergers in his comments to the committee.

“More consolidation would leave consumers with fewer and, no doubt, more expensive options for coverage,” Mr. Pollack said during last week's hearing. “It would diminish the insurers' willingness to be innovative partners with providers and consumers to transform care.”

Mr. Pollack's written testimony to the committee was particularly critical of Anthem's proposed $54 billion acquisition of Cigna, which he said would reduce competition “on a massive scale.”

“The Anthem/Cigna transaction threatens to reduce competition in at least 817 markets across the U.S. serving 45 million consumers,” Mr. Pollack said, citing the AHA's findings in a 33-page analysis of the deal submitted to federal antitrust regulators in August.

That analysis, Mr. Pollack said, indicated that the threat to competition from Anthem's proposed purchase of Cigna would span more than 100 cities and rural counties.

The AHA issued a separate analysis of the proposed $37 billion merger of Aetna and Humana Sept. 1, warning that the deal would create a single entity dominating the Medicare Advantage market in more than 1,038 counties in 38 states.

The AMA and AHA analyses were conducted according to the Herfindahl-Hirschman Index, the standard by which federal antitrust regulators evaluate resulting market concentration of potential mergers.

“Claims of offsetting efficiencies cannot ameliorate the competitive harm from this deal,” Mr. Pollack said in his written testimony. “Insurers have a dismal track record of passing any savings from an acquisition on to consumers, and there is no reason to believe that this transaction would be any different.”

Dan Durham, executive vice president of the insurers' advocacy organization America's Health Insurance Plans in Washington D.C., said during the hearing that large-scale mergers have indeed harmed health care consumers, though he was referring to ongoing consolidation among hospitals and physician groups.

“There is substantial evidence in peer-reviewed research that shows that a significant share of health care cost increases are driven by dominant providers charging higher prices,” Mr. Durham said, citing a 2014 study published in the Journal of the American Medical Association that showed per-patient cost increases of between 10% and 20% after hospital or health system acquisitions of physician groups.

Industry experts said the AMA and AHA critiques of the proposed mergers are hardly surprising, given the extent to which the resulting combined health insurers would increase their leverage over providers in pricing negotiations.

“They're making it known that it's not just a political point, but that there is legitimate economic justification for true analytic consideration of these mergers and whether they're ultimately good or bad for the marketplace,” said Rob Fuller, of counsel at Los Angeles-based law firm Nelson Hardiman L.L.P.

“I certainly support the idea that this is not going to be good for hospitals and doctors,” Mr. Fuller said. “Over time, I think insurance companies are going to lose the need for innovative solutions, and I don't think the insurance companies are going to pass any savings on to consumers or employers.”

Ed Kaplan, New York-based senior vice president and national health practice leader at The Segal Group Inc., said past health insurer mergers have typically resulted in some measure of pricing relief for employers, particularly those that self-insure their group health plans.

“History and experience show us that consolidation has forced the pricing down, but it's starting to compress a little bit, and the question becomes how much more does the industry think it can get from providers,” Mr. Kaplan said.

Additionally, Mr. Kaplan said procuring health coverage products and services tailored to individual accounts has become significantly more difficult as consolidation continues to shrink the marketplace.

“What we've lost is the ability to work customized deals and solutions for my clients in many cases,” Mr. Kaplan said. “Unless it's a jumbo account, health care coverage is becoming more of a commodity. I can still get some concessions on behalf of my larger clients, but it's much less frequent, and that's telling me that insurers are beginning to take terms to even the biggest brokers and consultants.”