Medical Groups Worry About Proposed Aetna/Humana Merger

Mark Crane

July 10, 2015

Leading medical groups said they worry that the proposed merger of Aetna and Humana, the 3rd and 4th largest US health insurers, could limit choices for patients, prevent physicians from joining insurance networks, and result in lower fees for physicians.

Aetna Inc, based in Hartford, Connecticut, announced last week that it would buy Humana, based in Louisville, Kentucky, for about $37 billion in cash and stock, the largest ever merger in the insurance industry. The deal, which would nearly triple Aetna's Medicare Advantage business, won't take place until mid-2016, at the earliest, and only if it clears federal antitrust hurdles.

"The combined company will be well positioned to offer a broad choice of affordable, consumer-centric health care products, helping to constrain cost growth, improve health outcomes, and promote wellness," Aetna said in a statement. "The combination will provide Aetna with an enhanced ability to work with providers and create value-based payment agreements that result in better care to consumers, and spread cutting-edge clinical practices and quality care."

But not everyone agrees with that positive projection. "There are serious potential negative impacts for patients and providers," Robert Wergin, MD, a family physician in Milford, Nebraska, and president of the American Academy of Family Physicians (AAFP), told Medscape Medical News. "It will mean fewer choices for patients. Larger systems can dominate markets and narrow their networks of physicians.

"The companies claim that they'll achieve efficiencies to reduce health costs but what usually happens is you'll see an increase in premiums and insurers can reduce the amount they pay to providers," he continued. "I practice in a town of 2,000 people. In such small markets, it's almost impossible to seriously negotiate with a large insurer. It's like being in 3rd grade. The bullies don't pick on the tough kids. They pick on the small ones, the wimps. We're the wimps here."

Even before the announcement of this proposed merger, the AAFP had advocated against consolidation of health insurers. In a letter to the Federal Trade Commission last month, the AAFP said, "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. Recent actions by the insurance industry, with respect to the narrowing of physician and hospital networks, would only be exacerbated if a single insurer held greater influence over any potential market, state, or region — potentially separating patients from their physicians and community hospitals.… Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians."

The Centers for Medicare & Medicaid Services recently announced that, after 2 years of relatively stable premiums, rates will increase in 2016 by double-digit percentages for individual policyholders in almost every state.

"We believe that consumers, physicians and our health care system benefit from greater competition, not less, in the health insurance marketplace," the AAFP letter said. "We urge the [Federal Trade Commission] to prevent consolidations that would limit choices for consumers and decrease competition within the health insurance industry."

The American Medical Association (AMA) is examining the proposed Aetna/Humana merger and also worries about the negative consequences of consolidation in the health insurance industry.

"Competition in the health insurance industry has been consistently eroding with more markets across the county dominated by 1 or 2 insurers," according to the AMA's annual analysis of markets. "Seventeen states have a single health insurer with a commercial market share of 50% or more," the analysis found. "The dominant market power of big health insurers increases the risk of anti-competitive behavior that harms patients as health insurers substitute corporate policy over good clinical decisions."

"The federal government and state regulators have an important role in protecting patients as the health insurance industry continues to consolidate, and we will be monitoring developments as companies move forward," AMA president Steven J. Stack, MD, said in a statement.

Greg McBride, chief financial analyst at Bankrate.com, told Medscape Medical News that he's also skeptical. "The continued consolidation among the biggest players — regardless of industry or how it is sold to the public — is not a benefit to consumers. Oligopolies and monopolies result in fewer choices, higher prices and poor service. Ask anyone that's ever been stuck on hold with their cable TV company," he said. "These mergers do, however, ultimately benefit investors and management of the companies."

Other consultants disagree. Dan Mendelson, chief executive officer of Avalere Health, a firm that tracks health insurance companies, told Medscape Medical News that one rationale behind the merger is that insurers can best increase their business in government markets such as Medicare and Medicaid. "That's where the growth is," he said. "Humana is strong in Medicare. Employer-sponsored health insurance is stable in the total number of people but the dollars are shrinking. Now that the exchanges are secure, we can expect to see growth in the number of employers who decide to use exchanges as mechanisms to purchase insurance.

"The other rationale is that health insurers need scale to spread the cost of sophisticated expensive [information technology] systems. These are sizeable investments. The only way to be efficient is to spread that cost over a larger base of patients," Mendelson said.

Regarding the worries of the AMA and AAFP that the merger will reduce competition and adversely affect physicians, Mendelson is doubtful. "The U.S. Justice Department will carefully scrutinize the deal," he said. "If they find anticompetitive actions in a particular market, they may require an insurer to divest an asset. But it won't be large scale. If the merger goes through, Aetna will have more coverage throughout the country but won't be concentrated in any one market. It's better for consumers if Aetna has a more competitive market position compared with the Blue plans that may dominate a particular market. So there will be more real competition."

On Capitol Hill, Senate Majority Leader Mitch McConnell (R-KY), expressed reservations about the Aetna/Humana merger. The announcement, "as I predicted during the debate 5 years ago, is the inevitable result of Obamacare's push toward consolidation as doctors, hospitals and insurers merge in response to an ever-growing government. I hope that Aetna will recognize the tremendous value and expertise residing in Humana's Kentucky workforce and will look to continue its close partnership with our experienced and educated workforce, the City of Louisville and our Commonwealth."

Rep. Marsha Blackburn (R-TN), said, "My concern would be that we are beginning to see a narrowing of the marketplace which leads to higher costs, fewer options and less access for plan enrollees."

Anthem Inc and Cigna Corp, the 2nd and 5th largest insurers by revenue, have resumed negotiation about a merger after Cigna rejected a public, $184-a-share bid from Anthem last month. If that deal and the Aetna/Humana deal go through, that would reduce the five largest insurers to three.

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