Doctor’s Association Sees Harm in Insurance Mergers

WASHINGTON — Doctors and hospitals are stepping up their criticism of proposed health insurance company mergers.

In a new study to be released on Tuesday, the American Medical Association says that most insurance markets in the United States are dominated by a few companies and would become even more concentrated with a plan by Anthem to acquire Cigna and a proposal by Aetna to buy Humana.

The American Hospital Association raised similar concerns last week in a letter to the Justice Department that said the proposed Aetna-Humana deal “threatens serious and widespread competitive harm” to Medicare beneficiaries because it would reduce options in the market for private Medicare Advantage plans. More than 30 percent of the 55 million Medicare beneficiaries have enrolled in such private plans, which provide an alternative to traditional Medicare.

The doctors’ group said the proposed mergers could reduce competition in up to 154 metropolitan areas in 23 states.

In its study, the medical association cited federal antitrust guidelines that say, “Mergers should not be permitted to create, enhance or entrench market power.” Under the guidelines, “a merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation or otherwise harm customers as a result of diminished competitive constraints.”

Dr. Steven J. Stack, a physician who is president of the American Medical Association, said the Obama administration must carefully review the proposed mergers because “a lack of competition in health insurer markets is not in the best interests of patients or physicians.”

Insurers and some economists say that criticism of the mergers is inspired by self-interest — a fear that bigger insurance companies will cut payments to doctors and hospitals. But the findings of the medical and hospital associations are broadly consistent with data collected by the Government Accountability Office, an independent investigative arm of Congress.

In a study required by the Affordable Care Act, the federal watchdog agency found that “enrollment was concentrated among the three largest insurers in most states.” The three largest carriers had at least 80 percent of the enrollment in 37 states, and “in more than half of these states, a single insurer had more than half of the total enrollees,” the accountability office said.

In reviewing the proposed mergers, the Justice Department will have access to much more data than outsiders have. Both houses of Congress are preparing for hearings that could put pressure on the department to investigate possible effects of the mergers.

Insurers say the mergers will enable them to increase the efficiency of health care, thus reducing costs. But Melinda R. Hatton, senior vice president of the American Hospital Association, said there was no guarantee that the companies would pass on the savings to consumers.

Hospitals have been buying physician groups, which increases their leverage in negotiations with insurance companies. But the American Medical Association said that about 60 percent of doctors providing patient care still worked in practices with 10 or fewer physicians.

The medical association has been systematically analyzing competition in insurance markets for 15 years. The studies have become newly relevant with the proposed mergers, which would reduce the number of major national health insurance companies to three from five.

In its latest report, the doctors’ group said the states with the least competitive commercial insurance markets were Alabama, Hawaii, Delaware, Michigan, Alaska, South Carolina, Louisiana, Nebraska, Illinois and North Dakota.

Looking at insurance markets in 388 metropolitan areas, the medical association said that 70 percent were “highly concentrated,” as that term is defined by antitrust officials using a formula known as the Herfindahl-Hirschman Index. The index is a commonly accepted measure of market concentration.

The Obama administration says the Affordable Care Act has helped hold down premiums by creating marketplaces where insurers compete for business. But Ms. Hatton of the hospital association said the proposed mergers would undermine that competition, making it more difficult to fulfill the promise of the health care law.

Source Link