Insurer mergers, ACA exchanges' sustainability will be issues to watch in 2016

The health insurance industry will be watching and waiting to see if antitrust regulators approve several big insurance mergers, whether the Affordable Care Act's exchange market grows more sustainable, and whether states adopt new regulations governing provider network adequacy.

Looming above all those issues is the possibility of the election of a Republican president who would seek to jettison the ACA framework and replace it with an entirely different healthcare financing framework.

The U.S. Justice Department's antitrust division is reviewing Aetna's $37 billion purchase of Humana and Anthem's $54 billion deal for Cigna Corp. Aetna would become the largest Medicare Advantage insurer. Anthem and Cigna combined would create an even bigger powerhouse vying for employers' lucrative business. Centene Corp. is also buying Health Net in a $7 billion deal that would consolidate Medicaid health plans.

The Obama administration has halted several big corporate mergers on the grounds that they would have reduced competition and potentially driven up prices. In its final months, the administration may feel emboldened to heed the calls from provider and consumer groups to nix the deals.

On the other hand, experts say, Justice may OK the deals—albeit with requirements that the merged companies divest plans in some markets—because there are still so many other health insurers operating in most markets around the country. In addition, the administration could try to secure assurances that the merged companies will not stop selling ACA exchange plans.

“The government can use the merger approval to extract concessions it cannot otherwise force on insurers, so the government would waste an opportunity if it just flatly opposes the mergers,” said Erik Gordon, a healthcare business professor at the University of Michigan.

Decisions are expected by this summer.

The ACA's insurance exchanges remain a wild card. HHS predicted 10 million Americans will have coverage through the marketplaces by the end of 2016, a modest uptick from the 9.1 million enrollees at the end of 2015. UnitedHealth Group will decide this year whether it will bail on the individual insurance exchanges in 2017 because it lost a lot of money on its exchange business in 2015.

The exchange risk pools skew toward older, sicker people, and early data indicate that younger, healthier people still aren't signing up in droves even as the tax penalty for not buying coverage goes up. UnitedHealth said consumers are gaming the system by using special mid-year enrollment rules to sign up when they get sick, though others question this. The public's reaction to the much-higher tax penalties will be watched closely.

Insurers will have to think especially hard this spring about how to price individual-market plans for 2017 because of several factors. For one, grandfathered plans that are not compliant with ACA rules no longer can be offered for 2017. That should bring more healthy enrollees into the ACA-governed market. In addition, two of the three ACA risk-mitigation programs—risk corridors and reinsurance—will sunset by next year, reducing the protections against adverse selection that plans now enjoy.

States will decide whether to tackle the problems of network adequacy and surprise out-of-network medical bills, which are causing growing consumer unrest. The National Association of Insurance Commissioners has offered model legislation.

“People may be upset or shocked or unhappy if they ultimately can't go to certain providers, but I would be surprised if the entire market swung the other way toward broader networks and higher premiums,” said Erin Trish, a health policy professor at the University of Southern California.