Proposed consolidation among health insurers could be hazardous to the nation's health

Consolidation—the acquisition of one competing business entity by another—is an ongoing issue in the health insurance and hospital markets. After consolidation, it's common that fewer choices and provider networks are available.

There is concern about the health impact of consolidation; however, there has been far more study of hospital mergers than insurance consolidation. Studies have shown that all too frequently after hospital deals, prices are higher, quality of care deteriorates and savings are not passed along to consumers.

The scope of currently proposed insurance mergers has led to increased government and media scrutiny of consolidation in the sector. Health insurance companies sell a product, insurance, and purchase one, healthcare. Excessive consolidation at the selling end can result in a monopoly, with anti-competitive marketing practices and higher costs to consumers. At the purchasing end, it can lead to monopsony, where one giant buyer negotiates with multiple sellers in the local market and pays healthcare providers unfairly low reimbursement for services.

In 2014, Aetna, Anthem, Blue Cross and Blue Shield plans, Cigna and UnitedHealth Group controlled 83% of the national insurance market, up from 79% in 2010. The proposed mergers that have elicited new concern—the $37 billion deal between Aetna and Humana and the $53 billion deal between Anthem and Cigna—would dramatically and possibly irreparably compromise healthcare in the U.S.

Insurance company mergers are subject to federal antitrust laws. Recent congressional hearings elicited testimony from key stakeholders, including the American Hospital Association and the American Medical Association. Several key points were made:

We conducted a study to assess the impact of changes in the health insurance market on individual and population health, using data from New York state. We focused on the number of plans in each county, with risk-adjusted rates of preventable hospitalizations (a proxy for poor primary-care access) and premature deaths from cardiovascular disease as outcomes.

In multivariate analyses, poverty was the only factor significantly associated with higher rates of preventable hospitalizations. As an independent variable, the number of plans was negatively correlated with a county's preventable hospitalization rate. The presence of fewer plans was associated with higher rates, indicating that having fewer plans represents a barrier to care.

Researchers at the not-for-profit National Bureau of Economic Research found that increased hospital competition lowers the cost of care and reduces risk-adjusted mortality from cardiovascular disease. Our data document an association between the number of health plans in a county and rates of premature mortality from cardiovascular disease. Seventy percent of counties with fewer plans than the state average had higher mortality rates than the state average.

There is strong consensus that further consolidation in the insurance market will result in higher costs to consumers, lower reimbursement to healthcare providers and inferior quality of care. Our analysis of data from a large and diverse state reinforces concern that having fewer available health plans contributes to poor health outcomes. It is clear that additional insurance market consolidation is bad for our health.