GOP blames ObamaCare for health insurance merger-mania
A frenzy of healthcare mergers has given Republicans’ a new line of attack against ObamaCare, which they say is boosting profits for insurance giants at a cost to consumers.
The merger mania — evidenced most recently by a $35 billion deal announced by Aetna and Humana last week — is sparking new fears that shrinking competition in the marketplace could take away power from patients.
Republicans, including Senate Majority Leader Mitch McConnell (R-Ky.), have been quick to blame ObamaCare for planned mergers, pointing to the spate of new regulations they say make it tougher for smaller companies to survive.
“The incentives are in there for consolidation,” Edmund Haislmaier, a senior health research fellow at the conservative Heritage Foundation, said about the healthcare law.
“For all the talk about competition, it’s really much more about consolidating everything so the government can better manage it,” he added.
The new company made up of Aetna and Humana would include more than 33 million members, or roughly 13 percent of people with health insurance in the United States.
The turn toward consolidation is also worrying smaller providers, which fear they might lose leverage to the larger insurance companies. For example, if insurers believe a certain provider’s rates are too high, it could decide to drop the firm out of their network.
Aetna and Humana are two of the nation’s five biggest health insurers, a club that also includes UnitedHealth Group, Cigna and Anthem. Each of the companies have been eying the others for months, exploring potential takeover bids as they navigate the new rules and markets under the Affordable Care Act.
And with two companies now out of the picture, the Aetna merger is likely to set off a fresh round of deal-making as the rest of the insurers look to bulk up and keep pace. Market experts predict that, by the end, just three out of the top five companies will be left.
Earlier this year, Anthem Inc. announced a massive $47 billion offer to buy out Cigna. Last week, a $6 billion deal was struck between two smaller insurers, Centene Corp. and Health Net Inc.
The merger activity is fueling new attacks from Republicans, who believe it supports their longtime claim that the healthcare law would drive up premiums.
McConnell blasted the proposed takeover of Louisville-based Humana as “the inevitable result of Obamacare’s push toward consolidation as doctors, hospitals, and insurers merge in response to an ever-growing government.”
Still, Haislmaier urged caution when pointing to ObamaCare as the sole cause of consolidation.
“You have to be careful not to over interpret it. A lot have other factors involved,” he said, adding that companies have been looking to trim costs and expand their footprint long before the Affordable Care Act.
Dan Mendelson, CEO of the consulting firm Avalere Health, said he doesn’t believe consolidation will hurt customers. He said it could allow companies to reduce their operating costs and pass along savings to their members, which he said “could be very significant.”
“You have to remember, these companies, while they’re larger, still make up less than half of the U.S. market,” he said, pointing to the dozens of Blue Cross Blue Shield plans that are still managed on the local level.
Aetna and Humana, both of which record profits upwards of $100 billion per year, are looking to be the first in what will likely be a long list of proposed mergers this year.
The country’s largest insurers are generally thriving under the healthcare law, which introduced millions of people into the marketplace. But they must also cope with rules, such as trimming their overhead spending and the requirement to cover people with preexisting conditions.
The launch of insurance exchanges has also made it more important for insurers to have a wider reach across the country to grab a larger share of the marketplace.
Shareholders still have to weigh in on the latest deal, which will be followed by a close analysis by government regulators at the Federal Trade Commission and the Department of Justice.
The FTC will be tasked with studying the potential effects of the merger and ensuring no state sees too much consolidation as a result. If Aetna appears to have too much influence in one state with its takeover of Humana, federal officials could request the company drop its share in that particular state.
During Aetna’s last major purchase, for example, regulators instructed that the company could not complete its takeover bid in Delaware, where there would have been less competition.
One provider advocate group, the American Academy of Family Physicians, sent a letter to the FTC last month urging officials to scrutinize the deal to protect millions of people who could end up with lower-quality insurance that costs more.
“Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians,” the group wrote in a letter to the FTC last month.
David Balto, who spent 20 years in the antitrust divisions of the DOJ and the FTC, said consolidation among the major insurers could roll back benefits under the Affordable Care Act.
“The evidence is clear-cut the health insurance concentration harms consumers in higher prices,” he said. “These deals should be blocked by the DOJ.”
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