Submitted by achenault on Wed, 10/21/2015 – 3:15pm
Mergers of already giant health care insurance companies are in the air and consumers have been asking what impact it could have on access to coverage, benefits, quality and choice. The Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing on September 22, 2015 to take testimony on the likely impact on consumers.
The proposed mergers right now are Aetna with Humana and Anthem with Cigna. Both will need approval of the U.S. Department of Justice (DOJ) which has to be satisfied that after the mergers there will still be a “competitive market” – a market with a sufficient number of both buyers and sellers such than no one buyer or seller is able to exercise control over the market or the price. Whether the DOJ will be satisfied remains to be seen. If both mergers are approved, the U.S. market will have three giants in this order: Anthem/Cigna; United Healthcare; Aetna/Humana.
An announcement that Aetna and Humana shareholders approved the deal was made on October 19, 2015. Aetna chair Mark Bertolini claimed at the announcement that “The acquisition will enable us to offer more consumers a broader choice of products, access to higher quality and more affordable care, and a better overall experience in more geographic locations across the country.” Together, the two companies would provide health benefits to 33 million+ consumers in the U.S.
Joseph Swedish, Anthem Chief Executive, testified at the Senate Judiciary hearing that the Anthem/Cigna combined health and wellness expertise will fill gaps in recommended care and more proactively engage consumers in managing their health. He also said the mergers would expand access to providers, improve quality by expanding innovative, value-based, accountable care models. Swedish claimed there is robust and growing competition in the areas where Anthem and Cigna operate and that there is currently no market overlap between Anthem and Cigna so competition will continue to flourish.
Not everyone sees the rosy picture painted by the CEOs. The American Medical Association and the American Hospital Association and others oppose the mergers.
Dr. Leemore S. Dafny, Ph.D, Professor and Director of Health Enterprise Management at the Kellogg School of Management at Northwestern University shared economic research showing that combining multiple companies into fewer companies result in higher premiums.
Consumers Union Senior Policy Counsel George Slover testified at the Judiciary hearing that consumers want meaningful choice. He noted that “… competition is an incentive to improve quality and lower costs.” Slover acknowledged that while insurance companies help to keep costs down by refusing to pay the high charges hospitals and doctors might otherwise demand, when you have “dominant players they can dictate to others, and thus increase prices and reduce quality.”
Slover noted that one potential reason for approving the mergers is that “giving these insurance companies more market power will offset the market power of hospitals and doctor groups.” Slover called this the “sumo wrestler theory,” meaning “that somehow adding market power at one level of the supply chain ‘stands up to’ and offsets market power at another level. But the actual result is just more market power, with more of all the harmful effects that flow from it.” Continuing with his sumo wrestler metaphor, Slover concluded “[t]he two sumo wrestlers typically end up deciding to shake hands – that is, they find an accommodation that benefits them both – and they go after everybody else. And the everybody else, those who don’t have market power – and that includes consumers with a ring-side seat, as well as smaller hospitals, local clinics, and medical practices – get tossed around, sat on, sometimes mercilessly crushed.”
Judiciary Subcommittee member Senator Al Franken, (D) from Minnesota, asked whether the companies would commit to passing along any savings to their customers. The answer was that “we are committed to driving affordability for our customers.” Sen Franken noted this really didn’t answer the question.
It is not clear when the Department of Justice review will conclude. The Federal Trade Commission also reviews the proposed mergers, and states will be reviewing them as well. UHCAN Ohio will be watching this issue closely as it strives for quality, affordable care for all Ohioans and will provide updates as they happen.