The combined impact of proposed mergers among four of the nation's largest health insurance companies would exceed federal antitrust guidelines designed to preserve competition in as many as 97 metropolitan areas within Texas and 16 other states, according to new special analyses of commercial health insurance markets issued by the American Medical Association.
For these locations, the mergers would enhance market power. According to the U.S. Department of Justice, "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 or incentives."
The mergers would also raise significant competitive concerns in additional markets. All told, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states.
"A lack of competition in health insurer markets is not in the best interests of patients or physicians," said AMA President Steven J. Stack, MD. "If a health insurer merger is likely to erode competition, employers and patients may be charged higher than competitive premiums, and physicians may be pressured to accept unfair terms that undermine their role as patient advocates and their ability to provide high-quality care. Given these factors, AMA is urging federal and state regulators to carefully review the proposed mergers and use enforcement tools to preserve competition."
A closer look at the Aetna-Humana merger shows it would enhance market power in 15 metropolitan areas within seven states, including Florida, Georgia, Illinois, Kentucky, Ohio, Texas, and Utah. The merger would also raise significant competitive concerns in additional markets. All told, AMA says, the Aetna-Humana merger would diminish competition in up to 58 metropolitan areas within 14 states, including Texas, Arizona, Florida, Georgia, Illinois, Indiana, Kentucky, Louisiana, Mississippi, Ohio, Tennessee, Utah, Wisconsin, and West Virginia.
According to AMA, on an individual basis, the Anthem-Cigna merger would enhance market power in 85 metropolitan areas within 13 states, including California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, and Virginia. The merger would also raise significant competitive concerns in additional markets. All told, the association says, the Anthem-Cigna merger would diminish competition in up to 111 metropolitan areas within all 14 states that Anthem currently operates: California, Colorado, Connecticut, Georgia, Indiana, Kentucky, Maine, Missouri, Nevada, New Hampshire, New York, Ohio, Virginia, and Wisconsin.
AMA bases these findings on an in-depth analysis of data used to create the newly released 2015 edition of AMA's Competition in Health Insurance: A Comprehensive Study of U.S. Markets, which offers the largest and most complete picture of competition in health insurance markets for 388 metropolitan areas, as well as all 50 states and the District of Columbia. The study includes 2013 data captured from commercial enrollment in fully and self-insured plans and includes participation in consumer-driven health plans.
The prospect of reducing five national health insurance carriers to just three should be viewed in the context of the unprecedented lack of competition that already exists in most health insurance markets. According to AMA's latest study:
- Seven out of 10 metropolitan areas studied had a significant absence of health insurer competition. These markets are rated "highly concentrated," based on federal guidelines used to assess the degree of competition in a given market.
- In nearly two out of five metropolitan areas studied, a single health insurer had at least a 50-percent share of the commercial health insurance market.
- Fourteen states had a single health insurer with at least a 50-percent share of the commercial health insurance market.
- Forty-six states had two health insurers with at least a 50-percent share of the commercial health insurance market.
- The 10 states with the least competitive commercial health insurance markets were (listed in order) Alabama, Hawaii, Delaware, Michigan, Alaska, South Carolina, Louisiana, Nebraska, Illinois, and North Dakota. See the 10 states with the least competitive HMO, PPO, or POS markets.
- The 10 states that experienced the biggest drop in competition levels between 2010 and 2013 were (listed in order) Louisiana, Idaho, New Jersey, Missouri, Montana, Illinois, Texas, West Virginia, Iowa, and Ohio.
The new AMA study will help lawmakers, policymakers, regulators, and researchers identify markets where mergers and acquisitions among health insurers may harm patients, physicians, and employers.
Competition in Health Insurance: A Comprehensive Study of U.S. Markets is free to AMA members. The study is also available to nonmembers. To order a copy, visit the online AMA Store, or call (800) 621-8335 and mention item number OP427113.
Action, Sept. 15, 2015