Consider this: There are six car repair shops in your small town that service an ever-growing population of cars that are aging and in frequent need of repair. Three of the repair shops then buy the other three.
Now there are only three car repair shops serving a still-growing number of aging cars.
Will the cost of car repair go down, or up, with less competition?
In recent weeks, various announced mergers have transformed the five largest for-profit health insurance companies in the United States — UnitedHealth Group, Anthem Inc., Aetna Inc., Humana, and Cigna Corp. — into a new big three of the industry. In early July, Aetna announced it would acquire Humana in a $37-billion deal. On July 24, Anthem announced it would acquire Cigna in a $54.2-billion deal.
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Those two deals alone will put close to 60 million Americans on Medicare under just two insurance providers. Fewer providers means less competition — and that could mean a significant rise in health care costs.
Fewer providers means less competition — and that could mean a significant rise in health care costs.
The largest of the three giants, by revenue, would be UnitedHealth Group (at $154 billion in projected 2015 revenue), followed by Anthem-Cigna (at $117 billion) and Aetna-Humana (at $115 billion), according to the Wall Street Journal. The companies have cast their mergers in a positive light. Bruce D. Broussard, the CEO of Humana, said the merged companies “will be even more effective in meeting the health needs of many more people.”
Since 2010 and the advent of Obamacare, these companies have said they’ve looked for ways to increase efficiencies and cut administrative costs. But many people across the country remain skeptical of the outcome of these mergers.
A 2014 report by the American Medical Association found that in 45 states, just one or two health insurers owned 50 percent of the commercial market share in each state. In 17 of those states, that 50-percent market share was owned by a single company.
The lack of competition drives prices up in every instance. The American Academy of Family Physicians says these facts “speak loudly against any further consolidation of the health insurance industry.”
As a response to these mergers, the American Hospital Association has asked William Baer, assistant attorney general for the U.S. Department of Justice Antitrust Division, to investigate and make sure that combining these companies will not create a massive health care trust. They have asked that each merger, especially the Anthem-Cigna deal, undergo close scrutiny.
Some physicians find it hard to believe that the proposed mergers of four out of the five major commercial health insurance companies in the U.S. will not have a significant impact on patient access to affordable health care. Some even say it could dampen health care research and innovation.
Mergers might mean less medical research and innovation, some doctors fear.
Recent events show that physicians and patients could be right to be concerned.
Some companies are engaging in cost-cutting procedures that their customers end up funding. For example, UnitedHealth Group set rates in New York that were close to what the state’s Medicaid program pays, the Wall Street Journal reported in 2013. Similar tactics were employed by Blue Shield in California.
Such measures could increase insurance plan premiums by double digits across the nation.
While Big Insurance and Wall Street may love the ka-ching of mergers and acquisitions, you can be sure it is the consumer who will end up being stuck with the higher tab — higher premiums, higher prices, and quite likely, less coverage. These higher prices will likely also mean increased and unfair leverage when insurance companies negotiate with hospitals, pharmaceutical companies and physicians.
With doctors getting the squeeze, they’ll have less time to focus on what should be the main concern of all of us: excellent care, fair rates, and better health.