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Health Insurance Mergers Expected to Bring Payer Concentration

Georgia, Colorado, and Connecticut are expected to experience a consolidation rise of 40 percent or more in commercial insurance.

- The health insurance industry is experiencing some significant transformations not only due to new policies under the Patient Protection and Affordable Care Act but also because of upcoming health insurance mergers among the nation’s top four health payers – Aetna and Humana along with Anthem and Cigna. A report published in Health Affairs and conducted by the National Association of Insurance Commissioners (NAIC) details how these mergers will affect health insurance markets in different states.

Health Insurance Marketplace

For example, Georgia, Colorado, and Connecticut are expected to experience a consolidation rise of 40 percent or more in commercial insurance. Also, a 60 percent rise in Medicare Advantage concentration is predicted for the states Ohio, Kansas, Alaska, and Iowa.

However, Medicaid managed care marketplaces will not be heavily impacted by the mergers between the major insurers. There are certain changes that will take place between the companies themselves, however.

For instance, the Aetna and Athem merger will be looking to diversify their product offerings, expand throughout market segments, and incorporate new distribution pathways.

By merging two companies into one, health insurers have a greater advantage in negotiating between medical providers as well as the opportunity to focus on value-based care reimbursement models, according to the report. These health insurance mergers are expected to bring more consolidation in payer markets, but what does this mean for individual healthcare networks in separate states?

The report indicates that payer markets and commercial insurance will see greater concentration after the health insurance mergers take place. Virginia and New Hampshire are two other states expected to see a large increase in commercial insurance concentration.

Also, an increase in the amount of commercial administrative-services only (ASO) plans will take place in Georgia, Florida, Connecticut, Colorado, and California after the mergers are implemented.

Also, Medicare Advantage concentration is expected to rise by 50 percent or more in Kansas, Alaska, Iowa, Ohio, and Missouri if the Department of Justice approves the health insurance mergers.

Aetna and Humana expressed that the merger will help the two lower overall insurance prices for consumers by working toward price drops among hospitals, providers and physicians. While the insurers are still claiming that lower administrative costs will benefit consumers by positioning more premium fees toward clinical benefits, the question remains as to whether this will harm competition within the market forces and bring about barriers to healthcare access in certain states such as higher premium costs.

The Federal Trade Commission and the Department of Justice are going to closely inspect the merger contracts and determine the plausibility of this consolidation due to its potential for far-reaching impact. Essentially, these organizations will see whether the mergers would violate anti-trust laws and potentially harm the consumers it serves.

Additionally, the attorneys general around the nation as well as state insurance commissions will have a chance to review the health insurance mergers to determine whether they will negatively impact their perspective markets or not.

“Upon completing their review, these regulators will have an opportunity to file suit (DOJ remedy) or issue a complaint (FTC remedy) on the combining organizations or their practices,” the Health Affairs report stated.

“It is possible that regulators would allow these deals to go forward, unencumbered, as proposed. This could be based on the idea that increased consolidation will actually benefit consumers due to the power of larger insurers to push down provider prices. However, such high-profile consolidations and significant revisions to local competition are likely to trigger some degree of regulatory action.”

“Another possible outcome is that the regulatory agencies block these acquisitions entirely. The FTC has been willing to intervene in several notable health care provider mergers and acquisitions over the past few years which could have reduced competition or resulted in concentrated market power.”

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