AMA Warns of Dangers of Health Insurance Mergers

With Anthem’s recently announced plans to buy Cigna for $48.4 billion, the American Medical Association is once again sounding the alarm about mergers and acquisitions in the health insurance industry, which the nation’s largest physician group says reduce competition and patient choice.

AMA charges that the ongoing trend of consolidations among health insurers is creating a market dynamic which “allows the few remaining companies to exploit their market power, dictate premium increases and pursue corporate policies that are contrary to patient interests.”

A 2014 study by the physician group of health insurance markets for 388 metropolitan areas, as well as all 50 states and the District of Columbia, found a serious decline in competition among health insurers with nearly 3 out of 4 metropolitan areas rated as “highly concentrated” according to federal guidelines. In addition, AMA’s study showed that 41 percent of metropolitan areas had a single health insurer with a commercial market share of 50 percent or more.

AMA specifically warns it has analyzed the Anthem-Cigna megadeal based on federal guidelines and that the proposed merger “would be presumed to be anticompetitive” in the commercial, combined (HMO+PPO+POS) markets in nine of the 14 states (Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Nevada, New Hampshire, and Virginia) in which Anthem is licensed to provide coverage.

Also See: Anthem to Buy Cigna for $48.4 Billion After Year of Talks

“We have long cautioned about the negative consequences of large health insurers pursuing merger strategies to assume dominant positions in local markets,” said Steven J. Stack, M.D., AMA’s president, in a written statement. “Health insurers have been unable to demonstrate that mergers create efficiency and lower health insurance premiums.”

Stack cites an AMA study of the 2008 merger involving UnitedHealth Group and Sierra Health Services which found that premiums increased after the merger by almost 14 percent relative to a control group.

 “To give commercial health insurers virtually unlimited power to exert control over an issue as significant and sensitive as patient health care is bad for patients and not good for the nation’s health care system,” Stack concludes. “Given the troubling trends in the health insurance market, the AMA believes federal and state regulators must take a hard look at proposed health insurer mergers. Antitrust laws that prohibit harmful mergers must be enforced and anticompetitive conduct by insurers must be stopped.”