Federal and state insurance regulators are mulling the fate of two pending health insurance mergers, and many large employers won't be disappointed if officials torpedo the deals.
Several surveys of Fortune 500 companies and other big employers reveal anxiety that the reduced competition among insurers will mean higher healthcare costs for them.
“Anytime you have a limited market and a limited number of key players and they come together, that's not a great thing for a purchaser,” said Larry Boress, CEO of the Midwest Business Group on Health. His coalition surveyed employer members in December, and 95% of respondents viewed the loss of competition as negative.
The tone is especially problematic for Anthem's $53 billion acquisition of Cigna Corp. Both insurers do a substantial amount of business with large, self-insured employers—companies that pay for their employees' medical costs but outsource provider networking, claims processing and care-management functions to insurers. The contracts are often called administrative services only, or ASO.
Boress said employers are “quite concerned” that the health plan mergers will lead to higher ASO contract fees and poorer customer service. Oftentimes, employers will want their own benefits service center for their workers, but merged plans could easily close those sites to avoid duplication and cut costs.
Employers that participate in the Pacific Business Group on Health are dubious that health plans will pass along savings to consumers and employers, said Bill Kramer, the organization's executive director for national health policy. “We haven't seen any evidence that will be the case,” said Kramer, who has discussed the issue with several top member executives.
Two investment banks, Leerink Partners and J.P. Morgan Securities, also surveyed several high-ranking health-benefits executives at self-insured employers and asked them specifically about the Anthem-Cigna deal.
“The survey findings were less positive than we expected,” J.P. Morgan analyst Gary Taylor wrote in an investor note. Thirty percent of J.P. Morgan's respondents did not believe a market served by a combined Anthem-Cigna, along with Aetna, UnitedHealth Group and state Blue Cross and Blue Shield plans, offered sufficient competition for self-insured businesses.
The same percentage also predicted Anthem and Cigna “would be able to raise ASO fees in an anti-competitive fashion.” J.P. Morgan surveyed 24 benefits executives at large, self-insured companies.
“Large employers' views on this question will be a very important source of information for the DOJ, and antitrust attorneys assure us that the DOJ is contacting large corporate customers to ask this question,” Taylor wrote in a synopsis of the survey, referring to the U.S. Department of Justice.
However, employers are also sounding alarms on other healthcare pressures, said Steve Wojcik, vice president of public policy at the National Business Group on Health. Wojcik said policymakers should be worrying more about the traditional structure of paying for every service, treatment or drug without any ties to quality.
“The bigger problem is the delivery of services and the way we pay for it,” he said. Wojcik also noted employers in the National Business Group on Health (which include Anthem and Cigna) believe “the rapid consolidation among health systems” is just as troublesome as insurance mergers.