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How Payers Could Compete in Midst of Health Insurance Mergers

In the lawsuit looking to block a health insurance merger between Aetna and Humana, the defense team has requested sanctions against government agencies.

By Vera Gruessner

Among the payers facing a Department of Justice lawsuit against their health insurance mergers, Aetna and Humana have requested sanctions due to the government allegedly delaying the release of documents the two insurers need. The Motion for Sanctions was filed in court on October 4, claiming that the Department of Health & Human Services (HHS) along with the Centers for Medicare & Medicaid Services (CMS) have committed “serious and prolonged discovery misconduct” in handling Aetna and Humana’s subpoena.

Health Insurance Mergers

Both the Department of Justice and the companies seeking health insurance mergers will need to provide documents for each other in order to prepare their assertions and witnesses. Due to a court schedule providing limited time to prepare, even if these federal agencies brought forward the sought documents, there may not be enough time for the payers’ lawyers to incorporate them in their defense, reported the Hartford Courant.

“The first few requests, they effectively are the end of the government's case, were they to be granted,” Ian Fisher, a partner in Chicago’s Hahn Loeser law firm, told the news source. “In antitrust, defining where the market is, that's the whole game.”

“It seems like the government is just overwhelmed, outgunned,” Fisher commented.

Aetna and Humana are seeking information from CMS due to the Department of Justice claiming that the health insurance merger would harm competition and particularly seniors who are covered under Medicare Advantage. The payers argue that their health insurance merger would lead them to handle 8 percent of all Medicare beneficiaries, which would leave the majority to be covered by other insurers.

READ MORE: Anthem Appeals Cigna Merger with Cost, Quality Arguments

However, Kaiser Health News reported that the Aetna and Humana health insurance merger would cover about 25 percent of Medicare Advantage national enrollment or 4.5 million beneficiaries.

More recently, UnitedHealthcare has also played a role in the lawsuit against the two health insurance mergers, according to the Hartford Courant. The national payer UnitedHealthcare has provided the Department of Justice with confidential proprietary documentation so that the government could work to block these health insurance mergers.

The payer is also attempting to keep the rivaling companies from seeing the court documents. The documents from UnitedHealthcare include provider pricing information, member data, and profit and loss projections.

If the health insurance mergers do not get blocked from proceeding through this lawsuit, other payers will be impacted significantly. The mergers would bring more opportunity and capabilities for Aetna-Humana and Anthem-Cigna. Small health insurance businesses would face greater competition in the market and may have a harder time holding onto their consumer base. Premium costs for policyholders of Aetna-Humana or Anthem-Cigna health plans could increase as well.

How can other payers compete more effectively against four national insurance companies that have merged into two? The answer is simple. If you can’t beat them, join them. Other insurers are advised to also pursue scale and acquisition, according to Thomas O’Connor, Managing Director at Berkery Noyes.

READ MORE: House Votes to Boost Health Insurance Options for Businesses

With consumers facing more choices in terms of their health plan benefits, more consolidated and larger companies could provide the needed customer service to assist policyholders with enrollment and medical claims.

“Scale will help them,” O’Connor told in a prior interview. “Consumers are facing an onslaught of choices much like the 401K plans in the past where they had to take more control over their insurance. Instead of an employer model, it’s moving more towards a consumerization model where they will have more input into their decisions and will pay for it themselves.”

“The companies that are bigger and have more resources can offer additional solutions,” he concluded. “It’s positive for the industry and consumers can benefit from it, but time will tell.”

The payer Aetna has also cut back on the number of regions it will be serving within the health insurance exchanges potentially due to the Department of Justice blocking its merger with Humana. With some major payers like UnitedHealthcare and Aetna pulling out of the public health insurance marketplace, it is possible for other insurers to follow suit in the coming years. The problem at hand is the continual financial losses some major payers faced while operating through the exchanges.

There are a number of solutions payers are advised to take when attempting to improve performance on the health insurance exchanges. Taking on the competition available through the exchanges and meeting consumer needs will help as well as using data to improve population health management and care coordination. These steps could reduce payers’ overall spend.

READ MORE: Wellmark BCBS Latest to Exit ACA Health Insurance Exchanges

In the midst of a lawsuit against the two large health insurance mergers between Aetna-Humana and Anthem-Cigna, commercial payers can also take steps to invest in scale and ensure they are able to compete effectively in a less competitive health insurance market.


Dig Deeper:

How Health Insurance Mergers Could Change the Payer Industry

How Payers Could Succeed in ACA Health Insurance Exchanges


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