By the time President-elect Donald Trump is sworn in as the nation’s 45th president, the nation’s health insurance industry could be poised for a major reorganization that could result in fewer insurers in the marketplace. This attempt at consolidation is happening just as Trump and a Republican-controlled Congress are poised to implement their reforms to the world’s most expensive health care market with the worst track record among industrialized capitalist democracies.
This week arguments began in the Department of Justice’s challenge to Hartford, Connecticut-based Aetna’s proposed $37 billion purchase of Louisville, Kentucky-based Humana, a merger that would bring together two of the top three largest health insurers. In a separate courtroom in the same building in Washington, Department of Justice lawyers have been arguing since Nov. 21 to block Indianapolis-based Anthem’s $48 billion bid to purchase Cigna of Bloomfield, Connecticut, in a deal that would create the nation’s largest insurer covering more than 50 million people.
If these mergers go through, throw in the 46 million people covered by Hopkins, Minnesota-based UnitedHealth and just three for-profit, dividends-paying private companies would collect ever-increasing premiums from more than 125 million Americans. Federal regulators argue there’s no way such consolidation could be good for American consumers.
The mergers underscore a rapidly consolidating market in which health insurers and health care providers are battling it out over how much they charge one another while customers and patients are wedged between them forking out thousands of dollars a year simply to have access to medical care. Companies argue that bigger is better, that somehow the health care industry is more efficient with a smaller number of companies. Some aren’t buying this argument.
“From my perspective, there’s little reason to think that these large mergers are going to help consumers,” Benjamin Sommers, assistant professor of health policy and economics at Harvard University’s T.H. Chan School of Public Health, told Salon on Friday.
The companies argue the opposite would happen: By becoming larger they would have more clout to strike deals with hospitals and doctors for lower health care prices. In a pretrial brief, Anthem argued that efforts to block its merger would “deprive American consumers of lower health care costs.”
In both cases, federal judges will have to decide which side of the argument is correct: Will consolidation lead to more choices and better prices or not?
Each merger faces different challenges that could lead to one, neither or both being approved by a judge. The government's Anthem-Cigna lawsuit has focused on disagreements between the two companies over how they would be integrated should the merger go through. In unsealed court testimony transcripts, Cigna CEO David Cordani expressed concern that Anthem would try to shift Cigna customers toward the Blue Cross Blue Shield Association that Anthem is a member of, while Anthem CEO Joseph Swedish disclosed that he had created a secret team to plan the integration of Cigna. The conflict contests a fundamental argument that Anthem has put forward for acquiring Cigna — that the merged entity would run more efficiently and pass those savings on to customers.
The government's case against the Aetna-Humana deal has largely been focused on how the merged entity would affect the market for Medicare Advantage, the private Medicare health plan used by about a third of all Medicare beneficiaries. The two companies control 25 percent of the Medicare Advantage market, according to the Kaiser Family Foundation. While part of the deal includes spinning off some of their Medicare Advantage business to Long Beach, California-based Molina Healthcare, the Department of Justice is arguing this doesn’t go far enough. In some states, like Missouri and West Virginia, the two companies control more than half and as much as 88 percent of the Medicare Advantage market, according to Reuters.
Also at issue is the insurers' continued participation in the Affordable Care Act, President Barack Obama’s signature health care reform legislation that’s brought coverage to 20 million Americans but has been blamed for alarming hikes in insurance premiums. The federal government is arguing that the Aetna-Humana merger would lead to a loss of competition on the public health insurance exchanges in Florida, Georgia and Missouri. Insurers, including Aetna, Humana and UnitedHealth, have already announced withdrawals from the exchanges, citing profitability. The Affordable Care Act gave these companies millions of new customers, but they argue that they have to cut some who are too unhealthy and too expensive to insure.
Looming above these mergers is the Republican takeover of Congress and the White House, which raises the chances of GOP reorganization, if not complete repeal, of the Affordable Care Act. The results of the Nov. 8 elections have also elevated House Speaker Paul Ryan’s efforts to expand the privatization of Medicare under his Better Way proposal, which dramatically reforms Medicare and hands more of the cherished federally funded program to giant publicly traded companies and the shareholders they serve.
One of the key problems, according to Sommers, is that there’s an arms race going on in American health care. As hospital and physician groups merge to gain clout against health insurers, the health insurers are doing the same to negotiate lower prices against the health care providers.
“As these providers get consolidated, insurers are mostly trying to maintain their leverage,” Sommers said. “From my perspective, there’s little reason to think that these large mergers are going to help consumers.”
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