Plans for the mega-mergers of health insurance companies are being driven by regulations included in the Affordable Care Act (ACA), according to a leading health policy analyst.
Four large insurance companies announced plans earlier this year for two separate multibillion-dollar mergers.
Humana and Aetna want to seal a $37 billion merger, while Anthem plans the $48 billion acquisition of Cigna. The Department of Justice (DOJ) has filed antitrust suits opposing both mergers.
Mergers reduce competition, which usually results in rising prices, according to Michael Cannon, director of health policies at the right-leaning Cato Institute.
“Competition reduces prices in physician care, hospital care, pharmaceuticals and other areas of health care,” Cannon told Patient Daily. “Mergers reduce competition, which means prices tend to be higher. That doesn’t necessarily mean mergers are bad. In many areas, including health care, there are advantages to scale.”
Consolidation and integration in health care, however, are not the results of competition to provide greater value, Cannon believes.
“They are the result of Obamacare,” he said. “Since the costs of regulatory compliance are generally fixed costs, greater regulation gives larger firms an advantage and creates barriers to entry for smaller firms. In addition, the provider regulation we are seeing now is being driven by providers who want to keep prices higher.”
The DOJ announced in July it was opposing the mergers, claiming they would harm seniors, working families, individuals and employers.
At a press conference following the filing of the suits, U.S. Attorney General Loretta Lynch said the mergers would “fundamentally reshape the health insurance industry.”
“They would leave much of the multi-trillion-dollar health insurance industry in the hands of three mammoth insurance companies, drastically constricting competition in a number of key markets that tens of millions of Americans rely on to receive health care,” she said.
Furthermore, the number of health insurance options available to nationwide employers would shrink from four to three, Lynch said.
“The biggest and fastest-growing providers of Medicare Advantage plans, which millions of seniors rely on for crucial medical coverage, would combine into just one,” she said. “And competition would be substantially reduced for hundreds of thousands of families and individuals who buy insurance on the public exchanges established under the Affordable Care Act.”
In a statement issued to NPR, Cigna indicated the company had not yet decided how to proceed in light of the lawsuit.
“Given the nature of the concerns raised by the DOJ and the overall status of the regulatory process, which under the terms of the merger agreement was led by Anthem, Cigna is currently evaluating its options consistent with its obligations under the agreement,” according to the statement.
The two lawsuits will be heard in federal district court in Washington, D.C. The first trial -- related to Anthem’s proposed takeover of Cigna -- is scheduled to be heard Nov. 21.
Judge Amy Jackson, presiding, has indicated she wants to issue a decision by Jan. 4, 2017. In a filing, Anthem asked that the court decide before the end of the year in order to set regulatory approvals by the merger deadline of April 30, 2017.
The second trial, on the proposed merger of Aetna and Humana, is scheduled for Dec. 5, with Judge John Bates indicating he should have a decision by Dec. 30.