Health Insurance Mergers: Questions Consumers Want Answered

Last July, four insurance giants announced proposed mergers. Anthem is proposing to purchase Cigna, and Aetna to purchase Humana. A merged Anthem-Cigna would cover 53 million people, and a merged Aetna-Humana would cover more than 33 million people. Together, these merged companies, along with United Health Group’s approximately 46 million insured consumers, would concentrate the coverage of 132 million lives in just three companies. These proposed mergers come at a time when the vast majority of commercial health insurance markets are already highly concentrated, and when the Medicare Advantage markets (in which all of the merging companies also participate) are also highly concentrated.

Here, we identify the important questions that regulators should address in their reviews of these proposed mergers and describe ways that consumer advocates can weigh in.

What is the process for merger review and approval?

For the proposed mergers to move forward, both federal and state regulators must review and approve them. The U.S. Department of Justice’s (DOJ) Antitrust Division is reviewing the proposed mergers to determine their impact on market concentration, negative effects on competition, potential “efficiencies” (savings and other benefits that result from companies combining), and whether new companies would be able to enter the market if the companies merged. The DOJ should complete its review in mid-2016.

At the same time, about 15 state attorneys general will review the proposed mergers for impacts on their states’ insurance markets and will coordinate their state-specific work with the DOJ. Also, the merging companies are required to file forms with state insurance regulators, and a state’s insurance commissioner may have authority to hold a public hearing on a pending merger. Insurance departments can place restrictions on the mergers in their own states if they believe the mergers will negatively affect consumer costs, access, or health care quality.

Public hearings give consumers and advocates opportunity to provide input

Many state insurance regulators are currently scheduling hearings on the impact of proposed health insurance mergers. Stakeholders, including consumer advocates, can participate in the hearings with oral or written testimony. For example, the California Department of Managed Health Care held a hearing in January in which consumer groups and other stakeholders testified.

Key questions to ask in a merger review process

Families USA has not yet taken a formal position on the proposed mergers, but we have weighed in by submitting a series of questions to the DOJ regarding the potential impact of proposed insurance company mergers on health care access, costs, and quality. We believe these questions should be resolved before any insurance merger is considered for approval. Some of the questions we urge regulators to consider before approving a health insurance merger include:

• Choice of plans and carriers: How will the merger affect the entry of new insurers in each geographic area? Are new entrants likely to be financially viable? This is particularly important to consider in light of the fact that federal loans for co-op plans are no longer available. What impact, if any, will mergers have on the health insurance marketplaces created under the Affordable Care Act in terms of the number of carriers offering plans and the types of plans offered?
• Effect on premiums in each market: How will the merger affect premium prices for individual marketplace insurance, small group insurance, large group insurance, and/or Medicare Advantage? In considering this, it is important to keep in mind:
  • Rate review at the state level can stop unreasonable price increases in the individual and small group markets, if state law provides this authority. But will a merger create entities that are too powerful for regulators to effectively oversee those entities? How will the proposed merger affect states that do not currently have a process to reject unreasonable premium prices?
• Savings to the consumer: What portion, if any, of projected savings from each of these mergers will actually return to plan enrollees in the form of lower average premiums, lower out-of-pocket costs, or increased benefits?
  • What evidence do previous health insurance mergers provide about the likelihood that consumers will directly benefit from any merger efficiencies? Can carriers assure that consumers will benefit from efficiencies?
• Access to providers: What are the possible effects of these mergers on access to health care providers? Please especially consider whether they could reduce access to in-network providers that have not generally had strong negotiating power with insurers and to which consumers often lack access, such as outpatient mental health providers, pediatric specialists, and hospitals and other providers located in low-income communities.

How consumer advocates can take action

There are three easy steps for getting involved in decision-making processes regarding health insurance mergers:

• Attend the “Health Care Industry Mergers and Acquisitions” workshop on Friday, February 5, at Families USA’s Health Action 2016 conference. This workshop will feature David Balto from the Law Offices of David Balto. Mr. Balto will provide information on the impacts of health insurance mergers on consumer health care costs, access, and quality. He will also discuss how advocates can get involved in the merger review process and best practices to follow when doing so. Mr. Balto will be joined by Erin Fuse Brown from the Georgia State University College of Law and Katherine Scarborough Mills from the Massachusetts Health Policy Commission, who will discuss the impacts of provider mergers on consumers.
• Determine whether your state is holding a hearing on the pending Anthem-Cigna and Aetna-Humana mergers. If it is not, urge state regulators to do so by explaining the potential impact of the mergers on state residents and ensuring your regulators know their authority over insurance mergers. Public hearings can bring to light important concerns with mergers that can influence the conditions that regulators might put on merged companies or whether a merger is approved at all.
• Weigh in on pending merger reviews at the federal and state level. You can do this by submitting comments on how you believe mergers would affect consumers or by submitting questions like those in Families USA’s letter to the DOJ.

What about provider mergers?

Although the four insurance giants have been in the spotlight recently, hospitals and other providers have also been increasing their market shares through consolidation. Predictably, like insurance companies, providers claim that mergers will create efficiencies, significant improvements in care coordination, and lower prices for the American health care consumer. However, there is a growing body of research that demonstrates provider consolidation is a mixed bag.

One of the latest reports comes from The Synthesis Project, an initiative of the Robert Wood Johnson Foundation, in “The Impact of Hospital Consolidation.” This report, like many others, concludes that hospital consolidation generally results in higher health care costs, and when hospitals merge in already concentrated markets, the price increases can be dramatic, often exceeding 20 percent. Provider mergers can present serious concerns for health care consumers in terms of health care access, quality, and affordability.

For more on provider mergers, see the Families USA blogs “Boston Hospital Acquisition Shines New Light on the Pitfalls of Mergers and Consolidation” and “Uptick in Hospital Mergers: A Doubled-Edged Sword for Consumers.” And in our January 2015 special report, Health Reform 2.0: Call to Action, Families USA advocates the need for states and the federal government to establish criteria to evaluate the impact of provider mergers on prices and health care quality before such mergers are allowed to proceed.