Private Payers News

Does Blocking Health Insurance Mergers Impact ACA Exchanges?

The DOJ claims that these health insurance mergers would harm seniors, employers, working families, and healthcare providers.

By Vera Gruessner

Last week, the Department of Justice announced that it will be filing lawsuits against the Anthem-Cigna and Aetna-Humana health insurance mergers. The issue at hand is that these health insurance mergers would increase concentration and hurt competition within the insurance industry, according to a press release from the Department of Justice.

Health Insurance Exchanges

These acquisitions would lead to the top five national health payers to consolidate down to only three major insurance companies, which would bring less competition to the market. Both the DOJ and state attorneys general have filed the lawsuits against these health insurance mergers in the U.S. District Court for the District of Columbia.

The DOJ claims that these health insurance mergers would harm seniors, employers, working families, and healthcare providers. There are 11 states that have joined the Department of Justice and are challenging the legality of of Anthem’s acquisition of Cigna while eight states have filed lawsuits against Aetna’s $37 billion acquisition of Humana.

“We all, including seniors, everyday workers and the previously uninsured and underinsured deserve affordable health insurance options,” Principal Deputy Associate Attorney General Bill Baer stated in the press release.  “Competition today drives these four successful firms to fight to give us affordable options.  There is no reason to put that dynamic at risk and that is why we are asking the court to stop these mergers and keep competition working for the benefit of the American consumer.”

The opponents of these acquisitions allege that they would decrease competition for millions of consumers around the country who have commercial, employer-sponsored health plans including coverage from large-group employers. The mergers would also pose significant complications to other payers attempting to compete in the market.

“The proposed mergers would eliminate two innovative competitors – Cigna and Humana – at a time when competition has been pressuring insurers to develop new models of care designed to keep Americans healthier, to deliver healthcare more efficiently and to control the costs of providing care,” Deputy Assistant Attorney General Sonia Pfaffenroth of the Justice Department’s Antitrust Division said in a public statement.  “The department will continue to work with our state colleagues to protect competition and innovation in this vitally important industry.”

The Aetna-Humana merger would also lead to a significant reduction in Medicare Advantage competition across 21 states and 350 counties. Additionally, the lawsuits suggest that the Aetna-Humana merger would cut down on competition when it comes to selling commercial plans on the public exchanges in 17 counties across Florida, Georgia and Missouri. Essentially, the federal agency is seeking to keep competition robust in the health insurance market and protect consumer interests.

“Competitive insurance markets are essential to providing Americans the affordable and high-quality healthcare they deserve,” Attorney General Loretta E. Lynch said in a public statement.  “These mergers would restrict competition for health insurance products sold in markets across the country and would give tremendous power over the nation’s health insurance industry to just three large companies.  Our actions seek to preserve competition that keeps premiums down and drives insurers to collaborate with doctors and hospitals to provide better healthcare for all Americans.”

On the other side of this conflict stands The Institute for Policy Innovation (IPI), which claims that, by blocking these health insurance mergers, this hurts the payers’ ability to survive the new health insurance marketplace affected by the Affordable Care Act.

According to an IPI news release, these lawsuits will keep the insurance companies from garnering profit and staying afloat in the health insurance exchanges. Essentially, without these mergers, the companies are likely to drop out of the exchanges, says Institute for Policy Innovation resident scholar Dr. Merrill Matthews.

“The Obama administration is attempting to block the Aetna-Humana and Anthem-Cigna mergers because it wants more competition, but if compounding financial losses force these companies to drop out of the exchanges, there won’t be any competition,” Matthews said in the news release.  “Two larger health insurers are better than none.”

“Health insurance company mergers started shortly after the ACA passed in order to survive the new environment of high costs and government regulations,” Matthews continued. “Not only was it completely predictable, we predicted it.  By consolidating, the companies are trying to achieve greater economic efficiencies.”

An example of this is Arizona’s Maricopa County, which originally had eight health payers operating in its health insurance exchange but that number has dropped to only three insurers in the last several years. Essentially, the IPI argues that if these health insurance companies are not given the opportunity to consolidate, there would be even fewer health payers available for consumers within the exchanges.

Nonetheless, the possibility that four of the top five health payers in the nation would have significant enough financial problems to nearly go bankrupt if these health insurance mergers do not take place is very unlikely.

It is also important to note that these health payers looking to merge their companies came out with their own statements last week claiming that these acquisitions will actually be beneficial to their health plan members. Aetna, for instance, alleges that the merger would bring seniors more opportunity to seek quality Medicare Advantage plans, which is in stark contrast from the claims brought forward by the Department of Justice.

There are clearly multiple sides to these health insurance mergers, but it seems that the federal agency is seeking to keep the payers from hurting middle-class families and individuals with employer-sponsored commercial plans by consolidating their businesses. The future will show whether these lawsuits will keep the mergers from continuing and impacting the insurance market.

 

Dig Deeper:

Department of Justice Moves to Block Health Insurance Mergers

Payers’ Perspective: Insurance Mergers Benefit Consumers