Carrier Mergers: Friend or Foe?

Carrier Mergers: Friend or Foe?

The health insurance industry has five major players that are easily recognizable and important nationwide carriers for employers: Aetna, Cigna, UHC, Humana, and Anthem. Recently, plans for mergers having the potential to limit that to just three have been released. Aetna CEO Mark Bertolini announced weeks ago that Aetna planned to acquire Humana, while this week Anthem CEO Joseph Swedish confirmed plans to acquire Cigna.

First off, take a look at how powerful these carriers are. 17% of the US’s GDP is in healthcare. This means that 5 companies, soon to be 3, are in control of almost a fifth of the entire nation’s GDP.

The Wall Street Journal paints an image of chummy company executives getting together for breakfast, duly noting the presence of antitrust lawyers, and chatting about the business. In reality, what’s happening could be incredibly grave for many employers. Even with antitrust regulation, to move from five nationwide carriers to three obviously limits your choices.

Many of our clients have employees in multiple states, and many could easily see options that cover all of their employees dwindle. In addition, with even less of a need to be better than the competition, what stops prices from rising?

The answer is that we don’t know, and we can’t think of viable solutions that would allow for the low prices these guys are touting over coffee and biscuits. According to Edward Kaplan, national health practice leader at Segel, “Plan sponsors are concerned they will have less choice and less flexible and responsive business partners without healthy market competition, and the cost advantages of these larger entities may not be realized by those ultimately paying for the care.”

When we see any major news outlet talking about health insurance, but focusing on the personalities and camaraderie behind the CEO titles, we want to look at what topics they’re skirting around. Every high-up executive involved in these mergers has talked about the potential to lower costs, but for who? There has been no adequate backing evidence presented for any of these claims, and precedent does not support them.

Common sense says that with little competition, there’s little motivation to keep costs low. Until we see some receipts for the claim that these mergers are good for consumers, we’re not buying it.