Insurer Consolidation Hurts Health Care Quality, Blocks Access

The consolidation of the nation's health insurance industry has given insurance companies the power to dictate the terms and conditions of patient coverage and physician payment agreements, driving many family physicians out of business and undermining patient care. That's what AAFP President Jim King, M.D., of Selmer, Tenn., told federal lawmakers during a recent hearing before the House Committee on Small Business.

"As economic heavyweights, health plans have no incentives to agree to physician requests when a doctor doesn't agree to the terms of the contract," said King, testifying before the House committee on Oct. 25. "The plan just removes the physician from the network. This means patients are essentially denied access to their physicians … unless physicians sign untenable contracts."

King, who was making his first appearance on Capitol Hill as the AAFP's new president, was joined on the panel by four other speakers, representing the AMA, the National Association for the Self-Employed, Consumers for Health Care Choices and Victory Wholesale Grocers, all of whom denounced the growing consolidation of the health insurance industry. Rep. Nydia Velazquez, D-N.Y., who chairs the committee, said in a prepared statement that health insurance consolidation "has left small businesses with fewer choices and physicians with diminished leverage to negotiate with plans."

King cited a study by investment bank Shattuck Hammond Partners LLC documenting that the number of national managed care companies has dropped dramatically since 1992, to its current low of only seven such firms. King also cited a study by the AMA (46-page PDF; About PDFs) showing that in 280 U.S. markets, at least one-third of the so-called covered lives are members of the single largest insurer in that market.

"In the U.S., only two insurance companies cover one-third of all insured Americans," King said. This type of market dominance eliminates competition, giving insurance companies the power to "carry out near-monopolistic insurer behaviors" that threaten quality improvements in the U.S. health care system, said King.

For example, although family physicians and other primary care specialists are advocating the patient-centered medical home as a way of providing comprehensive, continuous, coordinated and cost-effective patient care, the success of the model depends on an ongoing relationship between patients and their physicians. Those relationships are being affected by insurance companies who have the power to "dictate the terms of medical practice and limit our patients' "freedom of choice," King said.

King called on Congress to change the nation's antitrust laws so that physicians can function as "true market participants."

"The current statutes were established years ago during a very different competitive environment," said King. "Under these outmoded laws, physicians are barred from discussing the financial aspects of their practices with any entity unrelated to their practices."

Insurance companies, in contrast, are able to use their market share and sheer economic strength to control the insurance market.

"We (family physicians) need to have the ability to share information and to share problems and concerns as we look at the contracts so that we can make decisions that are in the best interest of our patients," King said during the question-and-answer segment of the hearing.

Cardiologist William Plested III, M.D., immediate past president of the AMA, told the committee, "The majority of physician practices are small businesses that are attempting to provide health insurance coverage to their employees in the face of substantial health insurance premiums." During the past decade, there have been more than 400 mergers in the health insurance industry, leading to higher premiums and decreased patient access to care, said Plested. If the current trend continues, the health care system will be dominated by a "few publicly traded companies that, unlike physicians, have an obligation to the shareholders, not to patients."

Plested urged the federal government to block a planned merger between UnitedHealth Group and Sierra Health Systems, which would give United an 80 percent market share in Nevada and a 94 percent market share of the HMO market in Clark County, Nev., which encompasses Las Vegas.

"It would have a devastating impact on Nevada's patients and physicians and will reverberate throughout the health care system as a harbinger of future unrestricted consolidation," Plested warned.

Greg Scandlen, president of Consumers for Health Care Choices, told the committee that "concentration in this market is not an accident and is not an inherent part of the small-group market."

He pointed out that in the late 1980s, the National Association of Insurance Commissioners sought to stabilize the market from an excess of competition and pushed through regulations that led to market consolidation, creating a system that is "overpriced, inefficient, unaccountable, inconvenient and incomprehensible to the consumer," said Scandlen.

"These are the characteristics of a noncompetitive market, insufficient competition," he said. "If you don't like what one company offers, it doesn't matter, because everybody else is offering the exact same thing."

The insurance market, Scandlen said, "sorely needs innovation and efficiency."