PERSPECTIVE: Insurance Company Mergers - Why Patients and Consumers Will Not be Better Off

by Frances Padilla Many Connecticut residents still don’t know that by the end of this year, Anthem Insurance Co. and CIGNA may merge—forcing us all into a dire situation.

Anthem currently provides health insurance to about 1.1 million state residents and CIGNA covers just short of half a million.  If the proposed Anthem-CIGNA merger is approved, the resulting mega-insurer will cover 64 percent of covered lives in Connecticut.  Anthem and CIGNA have policyholders in 27 states.

Additionally, Aetna, with a Connecticut enrollment of about 500,000, is proposing to merge with Kentucky-based Humana, and recent news accounts speculate that it is contemplating moving its headquarters out of Connecticut.

We at Universal Health Care Foundation have been tracking these mergers since last June.  The plans were made public shortly after the King vs. Burwell Supreme Court decision.  That decision, upholding the subsidies in the Affordable Care act, was a big win for consumers.

However, it was also a big win for insurers; as Wendell Potter pointed out in his blog post.  Since then, the merger proposals were submitted for approval to the Federal Trade Commission and individual states’ departments of insurance. The United States Department of Justice also has to rule on monopoly implications of the mergers.

In a letter to the Antitrust Division of the DOJ, the American Antitrust Institute states, “The acquisitions are troubling for two important reasons.  They are likely to substantially lessen competition in numerous health insurance markets in the U.S., to the detriment of consumers. And, crafting relief that would adequately protect consumers is inherently difficult.”

Mergers are justified on the basis of increased efficiency and opportunity for innovation, but past experience doesn’t uphold those claims. The Anthem-CIGNA proposal should be carefully questioned, because it can be expected to increase health insurance premiums, and cause deductibles, co-pays, and co-insurance out-of-pocket costs to spike.

Cost is already a major reason why consumers put off care. A Consumers Union poll found that costs are a “top of mind” worry for consumers, whether they are insured or not.  Thirty-five percent of respondents reported relying on home remedies or over-the-counter drugs instead of going to see the doctor when sick. Another 27 percent did not fill a prescription for needed medicine.

The Kaiser Family Foundation reports that for Connecticut, the average combined employee contributions to health insurance and deductibles doubled from 4.2 percent of income to 8.8 percent between 2003 and 2013, as a percent of median household income.  Workers are faced with increasing cost-sharing shifted to them by employers, many of whom are self-insured, and contract insurers to provide administrative services.  The use of high deductible plans, widely viewed as “under-insurance,” has taken off.

The Foundation has been using the image of two sumo wrestlers with the consumer and patient caught between the insurers and the hospitals. Hospitals merge, develop new revenue centers, acquire physician practices and create mega-systems with bargaining power over insurers.  And insurers merge to gain bargaining leverage, creating monopolies to protect the value of their stocks and meet shareholder expectations. Meanwhile, patients and consumers are left bereft of necessary care and shouldering the burden of medical debt.

https://youtu.be/eTRXFzb_U6c

Final resolution of the insurer mergers is in a holding pattern.  No one knows when the DOJ will rule on the antitrust issues, though. It may be in the next few months. Most state insurance commissioners are waiting for that decision to render theirs.  Some state statutes require public hearings, but most don’t.

Some observers think “all eyes are on Connecticut” with how the Anthem-CIGNA merger is handled here, given the market concentration that can be expected.  Connecticut statutes require our insurance commissioner, Katherine Wade, to evaluate the financial solvency of the merging companies and the benefit to policyholders.  She is a national leader among insurance commissioners and faces some criticism here for her refusal to recuse herself, given her ties to CIGNA.

The Department of Insurance is not required by statute to consider the impact of a proposed merger (or of rate hike increases) on affordability to policyholders.  Public hearings held in the past have been held at times and locations inaccessible to most consumers. They do accept testimony online, but few people provide it.

It is not yet clear when there will be a public hearing called in Connecticut. We do know that there has to be 30 days public notice.  And we have been told that there is interest in hearing from consumers, health care providers and employers.

Contact us if you want to have your voice heard by state officials, and join us to make sure people’s interests are put first.

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Frances Padilla is President of Universal Health Care Foundation of Connecticut

PERSPECTIVE commentaries by contributing writers appear each Sunday on Connecticut by the Numbers.  

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