By Jill Zorn
The evidence is clear: consolidation among health care providers or health insurers, is not good for consumers, and is particularly concerning to those of us who live in Connecticut.
Our previous blog on insurer and provider consolidation ended with this quote from Northwestern University Professor Leemore Dafny, “The consolidation in both of these industries has been shown to have an adverse impact on consumers.” Today’s blog focuses on health insurance industry consolidation. A future blog will dig deeper on hospital mergers.
As Professor Dafny lays out in this Commonwealth Fund policy brief, Evaluating the Impact of Health Insurance Industry Consolidation: Learning from Experience, the health insurance industry is already unusually consolidated. As of 2014, the four largest insurance companies had 83 percent of the commercial insurance market. The Anthem-CIGNA and Aetna-Humana mergers will obviously lead to even further market concentration.
To truly understand the impact on Connecticut consumers, though, it’s important to look at the effect on state and local markets. The American Medical Association has a history of collecting and publishing data on which state and local health insurance markets are the least competitive. Appended to their testimony at a September 29 hearing of the House Judiciary Subcommittee on Regulatory, Commercial and Antitrust Law is their most recent information on the potential impact of the Aetna-Humana and Anthem-CIGNA mergers on market concentration.
Table 1 of their analysis of the Anthem-CIGNA merger (see page 28 of the testimony pdf) shows that Connecticut is third on the list of states where the merger is “presumed likely to enhance market power” and the next page shows which local areas will be most affected. The greatest impact will be on the Hartford-West Hartford-East Hartford market, followed closely by the New Haven-Milford market, Waterbury, the Bridgeport-Stamford-Norwalk market and Danbury.
Another, study, published in Health Affairs, also shows Connecticut high on the list of states that will be negatively impacted. The state’s commercial insurance market will become 44 percent more consolidated and our ASO* market will become 47 percent more concentrated. (Scroll down to Tables 1 and 2).
In addition to the AMA, the American Hospital Association and many other provider groups are raising serious concerns about the mega-insurance mergers.
Needless to say, consumer groups are just as alarmed as provider groups about these proposed mergers. Past history shows that while insurer consolidation can lead to reduced payments to providers, those savings are unlikely to be passed along to their customers.
There is ample evidence that high market concentration among sellers of health insurance, like high market concentration among sellers of hospital or medical services – or of any other product or service, for that matter – leads to increased costs for consumers, and more broadly, to less value
A coalition of consumer and advocacy groups and unions, including the Connecticut Citizen Action Group, submitted written testimony to the committee, stating that the proposed reduction to three large, national insurers “will pose the threat of substantial harm to millions of consumers.” They have formed an organization, Coalition to Protect Consumer Choice, to educate the public and policy makers about the harm that could result from these mergers. Check out The Facts section on their web site for fact sheets, white papers, testimony and other resources.
*ASO=Administrative Services Only. Most large companies contract out to an ASO to administer their employees’ health benefits. Employers using ASOs are self-insured; they are actually funding the cost of insurance claims directly. They hire ASOs, often large insurers, to provide administrative support such as processing claims, building a provider network and providing customer service.