The American Medical Association (AMA) is drawing a line in the sand. The proposed merger of Anthem and Cigna will “reduce competition and choice” said the AMA President Steven J. Stack, M.D. today in a widely distributed press release.
Dr. Stack went on to say: “The proposed Anthem-Cigna merger would be presumed to be anticompetitive in the commercial, combined (HMO+PPO+POS) markets in 9 of the 14 states (NH, ME, IN, CT, VA, CO, GA, NV, KY) in which Anthem is licensed to provide coverage. The lack of a competitive health insurance market allows the few remaining companies to exploit their market power, dictate premium increases and pursue corporate policies that are contrary to patient interests.”
Urge to Merge Is Spreading
Anthem’s July 23 announcement is the third major merger announcement among private health insurance providers in July alone.
On July 2, Centene announced a $6.3 billion bid to buy Health Net, Inc.
On July 3, Aetna announced a $35 billion bid to buy Humana.
The Anthem deal, if it passes FTC muster, will be the largest deal ever in the health insurance industry.
Most analysts agree the triggering event for this mega-merger was the Supreme Court’s ruling in favor of continued subsidies for Obamacare. Subsidized health insurance for lower-income Americans essentially guarantees huge new markets for insurers.
AMA’s Position
“The American Medical Association believes patients are better served in a health care system that promotes competition and choice. We have long cautioned about the negative consequences of large health insurers pursuing merger strategies to assume dominant positions in local markets. Recently proposed mergers threaten to increase health insurer concentration, reduce competition and decrease choice.”
“The AMA’s own study shows that there has been a serious decline in competition among health insurers with nearly 3 out of 4 metropolitan areas rated as ‘highly concentrated’ according to federal guidelines used to assess market competition. In fact, 41% of metropolitan areas had a single health insurer with a commercial market share of 50% or more.”
Health insurers have been unable to demonstrate that mergers create efficiency and lower health insurance premiums. An AMA study of the 2008 merger involving UnitedHealth Group and Sierra Health Services found that premiums increased after the merger by almost 14% relative to a control group.
Bypassing the Insurers
One possible outcome of these mergers will be some dis-intermediation of the health care system.
A couple years ago Wal-Mart, in collaboration with Home Depot, put in place a program that offered a hip or knee replacement surgery, plus transportation for the employee and one other person to and from the hospital, plus hotel rooms and food at no charge if they used one of three designated hospitals for their surgery.
No Aetna, Anthem, Humana or United required.
Last year, Boeing and some of the hospitals in the Seattle/Puget Sound area teamed up to provide healthcare services—also without the benefit of an health insurer in the middle. The mechanism Boeing used to make this happen is the new system of accountable care organizations, or ACOs.
Under this new program, Boeing negotiated its own healthcare service contracts with ACOs in the Puget Sound-area. Their employees started using these providers in 2015. The three ACOS were set up by University of Washington Hospitals, Providence Health and Swedish Heath Services.
Are there more insurance company mergers on the horizon? Odds are, yes. Could we have a system with fewer private insurance companies servicing a shrinking number of privately insured patients? Yes, again.
