When Big Insurance Companies Merge, Who Benefits?

The U.S. Justice Department's lawsuits to block insurance industry deals that would combine Aetna and Humana, and Cigna and Anthem, have raised divergent views on who benefits and who might be harmed.

Both Aetna and Anthem say they will vigorously fight lawsuits by the Justice Department seeking to prevent the proposed $37 billion purchase of Humana Inc. by Hartford-based Aetna Inc. and a $54 billion deal in which Anthem Inc. would buy Bloomfield-based Cigna Corp.

The Justice Department has said numerous consumer groups would benefit if the lawsuits are successful: low-to-moderate income families, seniors, health care providers and employers.

But it's these same groups of people that the insurance companies say stand to gain if they are successful because merging will keep costs down for everyone.

Here's a look at how these different groups may be affected.

Low-To-Moderate Income Families

Insurance companies argue that they will reinvest the cost savings from a potential merger to provide better benefits to consumers.

But Vijay Das, a health care policy advocate for consumer rights advocacy group Public Citizen, doesn't think that will happen.

"The more competition in these marketplaces, the better, because then [consumers] have more choice to choose from different plans," he said. "But if there is more consolidation, the market power shifts to the insurance companies, where they have a 'take it or leave it' attitude because they are the only player in town."

Eliminating competition between Aetna and Humana, and Anthem and Cigna, would reduce choices and lead to higher premiums for thousands of consumers, many of whom could not afford health insurance purchased off the public exchanges, the Justice Department said in its lawsuits filed in District of Columbia federal court.

The Justice Department said it likely would also lead to increases in the amount of financial assistance offered through the public exchanges, harming taxpayers as well.

The four insurance companies say the mergers will increase health care innovations while keeping costs more affordable because of reduced operation costs. Aetna and Humana said a merger would build on each company's effort to build "innovative, technology-driven products," according to their potential merger website.

Aetna and Humana said they will also will be able to expand their offerings to more areas of the country, creating additional options for consumers.

Rex Santerre, a retired University of Connecticut professor of health care management and finance, said there is a chance the mergers could benefit consumers. For example, if Aetna and Humana operate in the same relevant product and geographical markets, the newly combined Aetna/Humana could have more buyer clout, forcing hospital and physician prices down in those areas, he said.

However, very few studies find that mergers actually lead to cost savings, Santerre said. Insurance companies generally merge for market power reasons to improve negotiation abilities, he said.

"Most of the current research finds that health insurance mergers are anti-competitive," Santerre said.

Seniors

The mergers may leave seniors, who visit doctors and hospitals more than twice as much as the average person and have less income than the average American household, vulnerable, according to the Justice Department.

Take, for example, an 85-year-old woman enrolled in the traditional Medicare program, but who also opts to purchase another plan that provides optical and dental care at a certain premium.

If the mergers go through, diminished competition could mean that insurance companies don't have to be as generous with the services this woman would receive through the supplemental plan -- either by eliminating certain providers or pharmacies, or raising the premiums on the plan, Santerre said.

Insurance companies "may be forced to include more doctors and dentists and pharmacies into their network if there is more competition," Santerre said. "Otherwise, they can cherry-pick the doctors they offer and the plans, which may not be convenient for some elderly people."

Currently, Aetna and Humana compete to offer seniors lower-cost coverage by working to keep premiums, maximum annual out-of-pocket costs, and the amounts of co-payments and coinsurance low, according to the two companies' court filings in the lawsuit.

The two companies also compete by offering wellness and care management programs and investing in programs designed to keep seniors healthier and in their own homes longer by, for example, installing ramps and providing transportation services.

"The merger would eliminate competition that has led Aetna and Humana to offer these high-quality plans, substantially lessen competition in the market generally, and end a rivalry that has led to lower prices, better benefits, more choices, and higher-quality care for seniors around the country," the Justice Department argues in court papers.

With a lack of competition, the companies don't have to be as generous with the benefits offered to seniors, and co-pays could be significantly higher, Santerre said.

But Aetna and Humana say there would still be robust competition in Medicare, as a combined company would serve only 8 percent of total Medicare beneficiaries. They say any perceived competition concerns can be addressed through divestitures.

Physicians and Health Care Providers

While insurance companies argue that consolidation will make them more efficient and accessible, critics say these mega-mergers will "destroy the practice of medicine" in Connecticut and throughout the country, said Matthew Katz, CEO of the Connecticut State Medical Society.

"Doctors are first and foremost concerned about these mergers because you have the big becoming bigger, the giants becoming Goliath, and they will dictate the terms and conditions of care delivery for patients," Katz said.

The mergers could eliminate doctors from networks, increase out-of-network co-payments and deny access to services, he said.

"It will stifle innovation, it will limit access, and it will not improve the quality of care one iota," Katz said.

But the four insurance companies say a merger could only benefit health care providers and help to provide affordable coverage.

Aetna and Human say the merger will reduce unnecessary costs and "facilitate the move to value-based payment agreements that will focus on clinical best practices and quality care," according to their website. The companies said they will also work with health care providers to offer new member-centered services, clinical intelligence and data integration and analytics solutions.

Anthem pointed to its affiliated health plans' Enhanced Personal Health Care program, which they said promotes the physician-patient relationship and sustainability of primary care "through enhanced reporting, comprehensive quality standards, expanded access, and shared savings." The merger would allow the company to expand the sharing of information, best practices and analytics for providers, according to their website.

In the lawsuits filed last week, the Justice Department said insurance companies traditionally reimburse providers on a "fee-for-service" basis, where providers are compensate for all, or almost all, services provided. But insurers are experimenting with and competing with each other to create contractual arrangements that reward doctors and hospitals for better health outcomes and lower total costs.

Competition is key to advancing these innovations in provider collaborations, according to the filing.

"Insurers compete by offering health care providers access to greater numbers of patients, more generous reimbursement terms, better service, and more innovative collaborations," department lawyers wrote. "The proposed merger will eliminate this competition between Anthem and Cigna and likely lead to lower reimbursement rates, less access to medical care, reduced quality, and fewer value-based provider collaborations."

Employers

Large-group employers in five Connecticut metropolitan areas would be harmed by the potential merger of Anthem and Cigna, according to the Justice Department.

Anthem and Cigna are often two of few remaining options for large-group employers in the five Connecticut areas and at least 30 more metropolitan areas. The Connecticut areas affected are Torrington, Hartford-West Hartford-East Hartford, Norwich-New London, New Haven-Milford and Bridgeport-Stamford-Norwalk, according to the filing.

Competition between the two companies has led both to develop new products for large-group employers. For example, the Justice Department pointed to Cigna's expansion of its "level funded" product, which allows smaller large-group employers to pay fixed monthly installments with a chance to get money back at the end of year if claims costs fall below the anticipated level.

Anthem and Cigna countered that employers can expect expanded access to quality and affordable health care for their employees and family members, according to their website.

Das said fewer health insurance choices for employers is bad for their employees and their group rates. Premiums could increase, as they already are, he said.

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