The economic forces driving four of the nation’s five biggest health insurers toward consolidation are powerful. So are the Justice Department’s reasons for suing to make sure those mergers don’t happen any time soon.
For the past year, federal authorities have been reviewing a $48 billion offer from Anthem – already a dominant supplier of employer-based insurance – to acquire its smaller competitor Cigna. Officials have also been studying a $37 billion proposal from Aetna to acquire Humana.
These massive deals would give Anthem the largest enrollment in the nation and allow Aetna to capitalize on the demographic growth generated by baby boomers in the Medicare Advantage market.
But an even bigger driver for health insurers has been the sense that, post-Affordable Care Act, size matters. As hospitals and physicians’ groups have consolidated into mega providers, the better to meet efficiency and care-quality goals under new health laws, they have also concentrated health care markets – and amassed unprecedented leverage with insurers.
Sign Up and Save
Get six months of free digital access to The Sacramento Bee
Here in Northern California, for instance, health care premiums and costs have risen in part because Sutter Health, the big dog in the region, has been able to drive hard bargains on reimbursement rates for doctors and hospitals, while federal law restricts health plan profits.
The Obama administration deserves praise for trying to block these mergers. The economic forces at work may be mighty, and it may not be enough, but people, not profits, have to be the bottom line on health care.
So insurers have felt commensurate pressure to acquire rivals, to negotiate cheaper prices from providers and spread costs.
Unfortunately for the rest of us, these urges to merge have serious repercussions. As it is, there is too little competition among insurers, to the detriment of consumers. Networks are already too narrow, and premiums are already too high.
Consumer groups and regulators have been warning for months that there’s little or no upside for the paying public in allowing three giant insurance companies to divvy up a multitrillion-dollar market relied on by more than 100 million Americans.
In California, for example, the Anthem-Cigna merger would create such a behemoth that Anthem would own more than 50 percent of the market in 28 counties. Imagine that as you picture your next health insurance open enrollment.
And though Anthem executives testified in March at hearings before the California Department of Insurance that as much as $2 billion in efficiencies could result from the mergers, Insurance Commissioner Dave Jones has said that the savings are “vague, speculative and impossible to verify” upon closer examination. Nor, he noted, would Anthem commit to pass savings onto consumers through lower premiums. The state of California has signed on to the Justice Department’s suit on this merger.
So the Obama administration deserves praise for taking Thursday’s antitrust action. The economic forces at work may be mighty, and it may not be enough, but the bottom line on health must be people, not profits.
We sympathize with insurers who are being forced to negotiate with increasingly massive provider networks. But the answer shouldn’t be a health care arms race.