Payer merger bubble pops: What it means for physicians
Merger mania has ended.
In January, the proposed $37 billion merger between Aetna and Humana was blocked by a judge. Weeks later, another federal judge ruled against the proposed $54 billion merger between Anthem and Cigna, the second- and third-largest commercial health insurers in the country.
All four payers have said that the deals have been called off as a result of the court decisions.
The mergers would have reshaped the healthcare industry. Physicians and other healthcare experts have argued that they would have harmed insurance markets by increasing costs, narrowing networks and giving payers too much bargaining power over healthcare providers.
The Anthem-Cigna merger would have created the largest health insurance company in the country. The U.S. Department of Justice brought the case against the merger, arguing that it would violate antitrust laws by creating a company so large that it would squelch competition from smaller companies in the health insurance market.
Anthem had claimed that the cost savings achieved by the merger would actually reduce premium prices for consumers, because it would allow the merged company to cut its own operating costs. This, Anthem said, would result in a new ability to offer lower-priced options to customers.
The judge’s order said that the merger had the potential to drive up costs to consumers, and to reduce choice for patients by creating a more restricted list of in-network healthcare providers.
This would have potentially dire consequences for primary care physicians who chose to accept other insurance offered by the national and state healthcare exchanges.
Physicians against mergers
The Physicians Advocacy Institute (PAI) applauded the judge’s decision. The institute advocates for fair and transparent payment policies to doctors from insurance companies and others.
“Big health insurers are zero for two when it comes to mergers, with federal courts delivering a resounding message that supports a competitive healthcare marketplace,” Robert W. Seligson, PAI president, said in a prepared statement.
“This merger would have resulted in higher prices and diminished innovation, which is bad news for patients already coping with narrow provider networks and increased out-of-pocket costs,” the statement added. “Competition helps keep premiums in check and allows more choice in which physicians patients choose to see for their medical care. This decision is a clear win for patients.”
With the merger off the table, competition for customers will continue between the two insurers. This means that primary care physicians will retain the power to negotiate on behalf of their patients, notes Randal Schultz, JD, a partner in the law firm of Lathrop & Gage LLP in Kansas City, Missouri, and chair of the firm’s Healthcare Strategic Business Planning Practice group.
“By eliminating that potential market power, you have more room to have primary care doctors have some kind of voice in the marketplace,” Schultz says. The blocked merger signals that it’s time for doctors to think seriously about new delivery models that will reduce costs in the system as a whole, he notes.
“We want to keep that corridor open for physicians, between historical costs and current costs,” he says.