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What will big health insurer mergers mean for our health care choices and costs?

Written by Diane Archer

On Friday, July 3, Aetna, the third largest health insurer, paid $34.1 billion for Humana, the fourth largest insurer, merging two of the biggest health insurers in America.  And, the mergers don’t stop there. There’s talk of UnitedHealth Group, the largest insurer, merging with Aetna. There’s also talk of Anthem, the second largest insurer, merging with Cigna, the fifth largest insurer.

We should be extremely concerned about these mergers. They could very well mean less choice and higher costs for millions of Americans.

While it’s hard to make a compelling case that there is much meaningful competition in the health insurance marketplace today (the kind of competition that brings down costs and improves quality, delivering value), millions of people with Medicare, in the health insurance exchanges, and with employer group coverage, do have some health plan choices. With insurer mergers, we could have less ability to find an affordable health plan or to choose a plan with in-network doctors whom we know and trust.

To be sure, more power for insurers means that they arguably would have more leverage over hospital and doctor rates. But, they are enormous today and still have been unable or unwilling to use their leverage. And, some would argue that the insurers will have a financial incentive to pay providers more, because that’s one way for them to generate more revenue. They can charge higher premiums if they are spending more on health care. (The Affordable Care Act limits insurer administrative costs and profits to 15-20 percent of premium dollars.)

More power for insurers also means more power for them to charge their members more without fear of losing business since members may not have a good lower-cost alternative. There are many examples of insurers merging and increasing rates significantly post merger.

To make matters worse, according to David Lansky, head of the Pacific Business Group on Health, the bigger the insurers are, the less accountable they may be willing to be regarding prices, quality and outcomes.

To the extent regulators in the states have power to shape these mergers, there is precious little evidence that all but a few of them will consider wielding that power on our behalf. (California and New York may be two exceptions.) Even when they’d like to, most lack the resources to do battle with health insurers. Remember that before the Affordable Care Act was passed, virtually every state allowed insurers to deny coverage to people with preexisting conditions, to sell policies with inadequate coverage, and to hike up rates excessively. Most also saw no need for transparency of prices or quality in the marketplace.

The U.S. Justice Department could intervene to stop these mergers.  But, even if it does, that is likely to be a short-term solution at best if Congress and our next president want to support big business interests.

At the end of the day, Medicare does a better job of controlling costs than the largest private health insurers and, as Robert Reich explains in this video, we should be giving everyone in America a Medicare option.


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