Insurance Mergers May Reduce Choice, Raise Costs, AAFP Warns Regulators

July 29, 2015 02:14 pm News Staff

Insurance companies that are already enjoying an influx of new patients could reduce the benefits of competition if federal regulators permit the proposed mergers of large carriers, the AAFP warned government officials this week.

[Illustration of health insurance card with pills laying on top]

Four of the five largest health insurance companies have announced plans to pursue mergers: Aetna with Humana and Anthem with Cigna. Two of the largest Medicaid managed care companies, Centene and HealthNet, also announced earlier this month that they intend to merge.

In response, the AAFP sent letters to the Department of Justice's Antitrust Division(2 page PDF) and leaders in the U.S. House and Senate(2 page PDF) to warn about the consequences of consolidation by large insurers, including the potential impact on patient care.

"The AAFP is profoundly concerned that these mergers, if allowed to be finalized, may result in decreased choice for consumers, higher costs for purchasers, and potentially establish mass disruptions in continuity of care due to changing and narrowing networks of physicians and hospitals," the letters read.

The letters ask government regulators and elected officials to review the proposed mergers carefully to ensure that the health profession can continue to be innovative, deliver quality care and reduce costs. Experience suggests that in markets dominated by one or a small group of large insurers, the opposite occurs.

Story highlights
  • The AAFP this week warned the Department of Justice and leaders of Congress about potential dangers if large insurers are permitted to merge.
  • Aetna has announced plans to merge with Humana and Anthem has announced plans to merge with Cigna.
  • In addition, there is speculation that UnitedHealthcare may want to combine with any of the companies that are proposing to merge.

Mergers often leave patients with limited choices and force physicians to agree to unacceptable payment rates.

"Bigger insurance companies mean increased leverage and unfair power over negotiating rates with consumers, purchasers, and physicians," the letters say.

Besides the announced mergers that are being pursued, the AAFP pointed out to leaders of Congress that there is wide speculation that UnitedHealthcare, the nation's largest for-profit insurance company, may want to join forces with any of the companies that are proposing to merge. That would allow just three very large insurers to exert control over Medicare Advantage, Medicaid managed care and commercial plans.

Fewer insurers lead to higher costs. A study published Feb. 11( in the American Journal of Health Economics revealed that if all insurers active in each state's individual insurance market had participated in that state's health insurance marketplace, premiums would have been 11 percent lower and federal subsidies for commercial insurance in 2014 could have been reduced by $1.7 billion.

"Recent actions by the insurance industry, with respect to the narrowing of physician and hospital networks, would only be exacerbated if a single insurer held greater influence over any potential market, state or region -- potentially separating patients from their physicians and community hospitals," the AAFP letter reads.

Consolidation is already reducing competition in the market. A single health insurer has a commercial market share of 50 percent or more in 17 states, according to research conducted by the AMA in 2014. The report also noted that in 45 states, two health insurers had a combined commercial market share of 50 percent or more.

"We are equally concerned that consolidation in the insurance market will drive rapid consolidation among hospital and health systems, turning our national health care system into an oligarchy, controlled by a handful of insurance and hospital systems," the letter reads. "A lesson learned over the past five years is that improvements in health care quality and efficiency are most likely to occur when physicians, working with consumers, purchasers, and payers, lead the innovation."

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