AAFP Warns FTC About Consequences of Insurance Mergers

June 11, 2015 03:41 pm News Staff

In response to recent news reports(www.modernhealthcare.com) that one of the nation's largest insurance companies is seeking a sale or merger, the AAFP warned the Federal Trade Commission (FTC) about the dangers that consolidation creates for physicians and patients.

[Binder labeled Merger and Acquisitions on top of graphs and charts]

AAFP Board Chair Reid Blackwelder, M.D., of Kingsport, Tenn, sent a letter(2 page PDF) to FTC Chairwoman Edith Ramirez on June 4 urging federal officials to prevent insurance company consolidations "that would limit choices for consumers and decrease competition within the health insurance industry."

"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," said Blackwelder in the letter.

News reports have detailed the efforts of Humana, the nation's fourth-largest insurer, to seek a buyer despite its dominant position in the market. Aetna and Cigna, the second- and fifth-largest insurers, respectively, were reportedly interested in purchasing the company. A merger or consolidation could limit the already reduced choices for physicians and patients in the insurer's territories, the letter pointed out.

"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," Blackwelder contended.

With 2014 revenues of $48.5 billion, Humana has the second-largest number of Medicare Advantage members -- more than 3 million patients -- which provides the highest source of its revenue, according to the Wall Street Journal.

The insurance market is already dominated by a handful of powerful companies, which the AAFP says threatens the ability of patients and physicians to make free choices. In 17 states, a single insurer controls 50 percent or more of the market. And in 45 states, only two insurers control at least 50 percent, according to the letter.

"In our opinion, these numbers suggest that a lack of competition clearly exists today and speak loudly against any further consolidation in the health insurance industry," Blackwelder wrote. "Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians."

According to industry experts who addressed the issue during a Politico Pro panel discussion last September, hospital mergers and acquisitions increased by 10 percent during the first quarter of 2014 compared with the same period the previous year.

Hospitals and insurers often make the case that a proposed merger will increase efficiency and provide greater benefits for consumers when the opposite has been the case during the recent rise in consolidation. According to a list of proposed insurance rates(ratereview.healthcare.gov) that CMS recently posted, after two years of relatively stable premiums, rates are slated to increase in 2016 by double digit percentages for individual policyholders in almost every state.

"We believe that consumers, physicians and our health care system benefit from greater competition, not less, in the health insurance marketplace," Blackwelder wrote.

The AAFP also warned the FTC(3 page PDF) last year about the potential harmful effects of continued consolidation.

More From AAFP
In the Trenches Blog: Not So Fast: AAFP Urging FTC Scrutiny of Health Industry Mergers
(6/9/2015)