AMA: Health Insurance Merger Cuts Medicare Advantage Competition
The American Medical Association stated that the Aetna-Humana health insurance merger would impact competition in the Medicare Advantage market.
By - The American Medical Association (AMA) announced in a press release earlier this week their position against the health insurance merger between Aetna and Humana, particularly regarding its impact on the Medicare Advantage market. The AMA is hoping that the Department of Justice lawsuit against the health insurance merger will lead to a court injunction blocking the Aetna-Humana acquisition from reducing market competition.
“The loss of head-to-head competition in the Medicare Advantage markets would threaten health care access, affordability and quality, while compromising the ability of physicians to advocate for their patients, a key safeguard of patient care,” wrote Andrew W. Gurman, MD, President of the American Medical Association.
Some of the issues raised by the AMA include a decrease in competition among already concentrated exchange markets in Florida, Georgia and Missouri as well as a negative impact on elderly patients served by the Medicare Advantage market. Based on an analysis from the AMA, the health insurance merger would lead to a decline in competition in 19 states where Aetna and Humana overlap.
Regulators from California and Missouri have also joined the AMA in supporting the Department of Justice lawsuit, claiming that the health insurance merger would harm competition in the Medicare Advantage market.
“These trials will soon determine if 52.6 percent of the $779.2-billion Health and Medical Insurance industry will be controlled by only three companies. If the court rules in favor of the mergers, competition will be significantly lowered in the market for Medicare Advantage and on the Affordable Care Act’s health insurance exchanges, which could lead to higher premiums and lower coverage,” IBISWorld Industry Analyst Jack Curran said in a statement.
Other key problems associated with the health insurance merger include a potential rise in premium costs, reduced quality and affordability, and fewer choices in the Medicare Advantage market, according to the press release. Research shows that large health insurance mergers could actually lead to a rise in premium costs.
For example, one study showed that the 2008 merger between Sierra Health and UnitedHealth led small group premiums in two Nevada markets to rise by 13.7 percent the year after the merger completed, according to The Commonwealth Fund.
Aetna claims merger will bring benefits
The AMA’s solution to these problems is a court injunction preventing the health insurance merger from proceeding. However, when Aetna announced its plan for the merger last year in a press release, the company claimed the acquisition would do the opposite and bring benefits to the Medicare Advantage market.
The payer claimed that the merger would enhance quality of care and improve affordability by cutting down on administrative costs and leveraging the best practices between the two companies.
Aetna stated that a more consumer-centered organization will be formed due to the merger, which would boost health outcomes and wellness by strengthening value-based care payment programs with providers. Aetna also claimed that the merger would bring more innovative technology offerings to consumers, which would improve transparency and offer high-quality care at lower cost.
“Aetna and Humana share a strong commitment to improving the health and well-being of consumers, whatever their needs and wherever they are on their lifelong health journey,” said Bruce D. Broussard, president and CEO of Humana.
“Through the use of technology and integrated services to simplify the consumer experience, the combined entity will be even more effective in meeting the health needs of many more people — especially people with chronic conditions, who will benefit from Humana’s home health, pharmacy management, and data analytics programs,” Broussard stated.
Aetna’s and Humana’s divestitures
Another solution to allay the potential problems of reduced market competition and higher costs among Medicare Advantage beneficiaries, Aetna and Humana pursued divestitures this past summer. Aetna and Humana entered into contracts that would sell sections of their Medicare Advantage assets to the company Molina Healthcare, Inc.
The transaction totaled $117 million and moves 290,000 Medicare Advantage members across 21 states to Molina Healthcare. Some of the states affected by this transaction include Alabama, Arkansas, Florida, Georgia, Illinois, and Louisiana. This move would potentially offset the decreased market competition that the health insurance merger may bring.
The future for this health insurance merger will depend upon the outcome of the Department of Justice lawsuit. The AMA and multiple regulators have concerns regarding the harm to Medicare Advantage market competition the merger may cause. Aetna and Humana, however, have gone forward with selling Medicare Advantage assets to Molina Healthcare to reduce the potential impact on competition.
Dig Deeper:
How Health Insurance Mergers Could Change the Payer Industry
How Payers Should Prepare for Value-Based Reimbursement
