AAI Asks DOJ to “Just Say No” to Health Insurance Mergers

January 13, 2016 - The latest news regarding the Aetna-Humana and Anthem-Cigna mergers revolves around a new letter sent to the Department of Justice Antitrust Division by the American Antitrust Institute. The letter states it concerns about the impending mergers within the health insurance industry.

There are two main reasons the American Antitrust Institute believes the acquisitions are troublesome for the health payer space. These are: (1) the breakdown of competition between numerous health insurers due to the potential monopoly these mergers will play in the health insurance marketplace including its negative impact on consumers, and (2) the challenge of providing relief to consumers and their relevant interests.

The timing of the mergers is not ideal, the letter argues. Currently, the commercial health payer market is concentrated and very volatile with “changing market conditions” and a challenging to predict environment.

These mergers may even harm the progress that’s been completed by the Patient Protection and Affordable Care Act, the letter states, by inhibiting competition and its benefit to consumers. The letter from the American Antitrust Institute also mentions the complexity that the Department of Justice must manage with deciding whether both the Aetna-Humana and Anthem-Cigna mergers are allowed to proceed.

The American Antitrust Institute advises the Department of Justice to “just say no” to the two health insurance merger deals. The letter states some key information from the American Medical Association, which details how the health insurance mergers – particularly the one between Anthem and Cigna – will “enhance market power in 85 metropolitan statistical areas.”

The biggest issue with the mergers is that it would bring the five major health insurance companies in the United States down to only three, which would clearly affect market competition. Essentially, the letter argues against consolidation within the healthcare industry because it hurts competition and harms consumer interests.

“Consolidation motivated largely by the quest for greater bargaining power between various participants in the supply chain is a losing proposition for competition and consumers,” the letter stated. “Prices that are determined by bargaining between powerful buyers and sellers, as opposed to rivalry in competitive markets, rarely improve consumer welfare. But in addition to the risk of higher prices, lower quality, less choice, and loss of innovation that are the standard concerns in antitrust analysis, reactive consolidation raises the specter of potentially more damaging effects.”

Last September, the American Hospital Association also sent a letter to the Department of Justice and the Department of Health and Human Services (HHS) in which the organization argued about the implications of the health insurance mergers. In particular, they were concerned with the reduced market competition led by the acquisitions.

As previously reported, former Secretary of State Hillary Clinton has also come out against the health insurance mergers and acquisitions. Currently, there are various consolidations taking place in the whole healthcare delivery system including entire networks of providers and the payer space.

A major issue at hand is that these health insurance mergers could lead to higher premium costs for consumers and may also impact the prices and well-being of consumers in more remote states.

With the single-physician primary care office being left behind, it might be useful to see whether the consolidation among healthcare providers is also affecting the well-being of consumers and the patient community.

The American Medical Association also stepped forward with a letter to the Assistant Attorney General William Baer of the Department of Justice in which the organization argued how the mergers may affect healthcare affordability, access to care, and quality of medical care.

AMA President Steven J. Stack, M.D., has said publicly that these health insurance mergers are not in the best interests of the American people including doctors and the patient community. In particular, Stack showed concern with the potential of higher premiums among consumers due to the erosion of market competition.

The AMA also stated that these mergers will actually be breaking federal antitrust guidelines and bring anticompetitive stances among 17 states while decreasing competition in “154 metropolitan areas within 23 states.”

However, one expert in the health payer field does not find that the health insurance mergers will pose significant problems or an actual monopoly on the market. Patrick Pilch, Managing Director and National Healthcare Advisory Leader of The BDO Center for Healthcare Excellence & Innovation, claimed that the mergers and acquisitions will not bring a harmful monopoly to the payer industry.

“I don’t envision seeing monopolies, possibly oligolopic organizations,” Pilch told HealthPayerIntelligence.com. “There certainly will be market concentrations. I do know the Department of Justice looks at the Herfindahl–Hirschman Index “HHI” as a means to calculate market share for respective participants and where the calibration and concentration is that causes them concern.”

The DOJ considers a calculation calculations of in excess of certain thresholds indicates market concentration definition which informs actions to be pursued by the DOJ. I think, by virtue of that, we will see some peel back of plans that have certain geographic market share concentrations. That’s where that will be the offset for a potential for monopolistic organizations.”

“One could make the argument that these payer mergers will lead to single payer or maybe a utility so that it becomes regulated. I believe that this will be a long way away. Through the FTC, regulators are looking at where the measures of concentration are and how they play there.”

“Let’s say one particular market has a high Medicaid volume. The managed Medicaid payer in that market has the premium product and the premium market share. Regulators may look deeper into that. There are other measurements to explore the issues of mergers.”

“As far as a pure monopoly, I don’t see it as I do believe there will be considerable pushback by the FTC.”