As the health insurance landscape transforms under Obamacare, so, too, have those who populate it. The latest shakeup? Two major health insurance mergers were announced in July. Aetna purchased Humana for $37 billion, and Anthem purchased Cigna, creating the nation’s largest insurer in terms of membership.1 These multi-billion insurance mergers trimmed the number of major U.S. health insurers from five to three.2
The largest health insurance companies in the U.S. will be Anthem/Cigna, Aetna/Humana and United. In a July 6 CNBC report, one analyst estimated these public health insurance companies “would command about a third of the U.S. healthcare market, with regional players and government programs covering most of the rest.”3
In a press release, David M. Cordani, President and Chief Executive Officer of Cigna, said of Anthem-Cigna merger, “The complementary nature of our businesses will allow us to leverage the deep global health care knowledge, local market talent, and expertise of both organizations to ensure that consumers have access to affordable and personalized solutions across diverse life and health stages and position us for sustained success.”
Will fewer major players offer more options and affordability?
Many consumers want to know how these recent healthcare mergers and acquisitions will impact health insurance costs. It may be too early to say definitively, but many experts, citing past evidence, suspect the average cost of health insurance will rise.
In a July 10, Los Angeles Times article, a researcher from USC’s Schaeffer Center for Health Policy and Economics pointed out “When insurers merge, there’s almost always an increase in premiums.”4
Dr. Leemore Dafny, a professor at the Kellogg School of Management at Northwestern University told the Hartford Courant, “Research has not been too friendly to these mergers. If past is prologue and if you look at the averages, premiums go up.”5
Thomas L. Greaney, an expert on health and antitrust law at Saint Louis University, told The New York Times, “Economic evidence shows that with fewer competitors, insurance premiums tend to be higher. Less competition among insurers produces higher prices for consumers.”6
However, these individuals also point out the potential for larger insurers to negotiate lower rates with hospitals and drug companies—though, it’s debatable whether or not such savings will be passed on to consumers.7
And, furthermore, not everyone agrees. Chad Krusing, director of communications for America’s Health Insurance Plans, told CNN Money, “there is little evidence that mergers in health insurance increase costs” and pointed to consolidation among hospitals and other healthcare providers as the real culprit for higher premiums.8
Consumers aren’t the only ones on edge. Politicians and medical industry groups have vocalized their concerns. In a letter to the Federal Trade Commission, the American Academy of Family Physicians stated, “mergers in the health insurance industry would have an immediate and profound negative impact on the availability and affordability of health insurance for millions of consumers.”
The antitrust division of the Justice Department is reviewing the mergers. The New York Times explains that, after the mergers, “regulators will look for changes in the competitive landscape, which will vary by location and the type of insurance—whether it serves larger employers or offers Medicare Advantage plans” and “whether the markets remain competitive.” In September, the U.S. House of Representatives Judiciary Committee will hold two hearings to discuss concerns about reduced competition in the healthcare industry.
What can consumers do about health insurance premium increases?
It may be too soon to know what will happen to health insurance rates due to recent mergers and acquisitions. The impact won’t be felt immediately.
What consumers can—and should—do annually is assess their current coverage and determine what is and is not working for them, make note of what they are looking for in a plan, and shop around when open enrollment begins (and during any future open-enrollment period). Working with a health insurance agent or broker can also help consumers explore their options and find health insurance benefits that match their healthcare needs and budget.
Exploring supplemental health insurance plan options that help reduce out-of-pocket healthcare spending is also wise. For instance, Metal Gap, which is available at www.healthedeals.com, provides lump-sum benefits that help consumers pay their health insurance deductible and other expenses when a covered accident or illness occurs.