With Mergers, Concerns Grown About Private Medicare

As some of the nation’s largest health insurers plan to merge, a new report raises fresh concern over the lack of competition in the private Medicare market. The analysis, released on Tuesday, concludes “there is little competition anywhere in the nation.”

The report from the Commonwealth Fund, a research group, looked at the market share of insurance companies offering private Medicare Advantage plans in 2012. The authors found that 97 percent of markets in United States counties were “highly concentrated,” in which a small number of insurers dominated. The lack of competition was worse in rural markets.

Only one county, Riverside, Calif., qualified as a competitive market, according to the report.

For decades, insurers have offered private plans as an alternative to traditional Medicare, the government-run program that provides coverage to about two-thirds of beneficiaries.

UnitedHealth Group, Humana and Aetna are all major players in the private Medicare Advantage market. While UnitedHealth remains independent, Humana and Aetna announced this year that they planned to combine forces.

Proponents of these plans say competition from private insurers benefits consumers by reducing Medicare costs and improving the quality of their coverage.

“Seniors are overwhelmingly satisfied with Medicare Advantage because of the wide range of coverage options available and the overall value these plans provide,” Clare Krusing, a spokeswoman for America’s Health Insurance Plans, a Washington trade association, said in an email. “This market remains competitive, particularly with Medicare Advantage plans demonstrating improved care delivery for beneficiaries compared to traditional Medicare.”

But the study’s findings come at a point when the proposed mergers of Aetna and Humana, as well as that of Anthem and Cigna, could allow the nation’s largest insurers to gain even more leverage in a market. Consumer advocates and others have raised concerns over whether individuals will benefit from the mergers, which reduce the number of the five largest for-profit companies to three.

The effects on consumers are expected to vary widely, depending on the place and the type of market, and whether policies are sold to individuals, large employers or Medicare beneficiaries.

The report’s authors are Dr. Brian Biles, a health policy professor at George Washington University; Stuart Guterman, a former Medicare official and Commonwealth executive who is now at AcademyHealth in Washington; and Giselle Casillas, now a policy analyst at the Kaiser Family Foundation.

“Market forces can be very powerful,” Mr. Guterman said. Allowing private plans to compete may not yield the benefits proponents want if there are only a handful of dominant companies in a market, he added.

The Commonwealth study found the same pattern in the Medicare Advantage market that exists in the other insurance markets. “In the private market, there’s a lot of concentration among the large national plans,” he said.

Federal regulators will have to determine whether the mergers could result in higher prices or fewer options for consumers, particularly in some locations. In Kansas, for example, Aetna and Humana have 90 percent of the Medicare Advantage market, according to data from the Kaiser Family Foundation.

The insurers argue that consumers will still have plenty of options, even if the proposed combinations take place. “The Medicare space is highly competitive,” said Cynthia B. Michener, a spokeswoman for Aetna. “A combined Aetna-Humana would serve only 8 percent of the current 54 million Medicare beneficiaries, with the remainder being served by the government and more than 140 private insurers,” she said.

The acquisition will allow Aetna to expand Humana’s highly regarded model of care to more people, Ms. Michener said.

Because people always have the choice of staying with or switching to traditional Medicare, the plans have to be competitive, said Elizabeth Carpenter, an executive at Avalere, a consultancy that recently took a look at the market. The private companies are given “a strong incentive to beat” traditional Medicare, she said.

“They can each bring out the best in each other,” said Mr. Guterman.

Federal officials also keep close tabs on the private plans, according to Ms. Carpenter. She also pointed to the government’s program of assigning star ratings to the plans as a way to foster competition among the private insurers.

In its analysis, which was funded by Aetna but over which it says it had complete editorial control, Avalere also looked at the number of plans from which an individual could choose. It found the vast majority of Medicare beneficiaries could pick from at least five.

Unlike Commonwealth, Avalere did not look at whether individuals had a choice of insurance company, and the analysis did not take into account how many people were enrolled in a given plan.

“Having more choice is good if they’re real choices,” said Mr. Guterman, who added that consumers needed to be able to choose among distinct plans.

Private insurers may be effective at controlling costs and improving the quality of care, but “you have to have competition for this to happen,” he said.

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