Merger of Four Major Insurance Companies May Harm Healthcare Industry

Doctors, hospitals and healthcare groups criticized the proposed merger of four major insurances, saying that it could lead to harm for the healthcare industry.

The New York Times reports that the American Medical Association (AMA) said that the insurance market in the United States is dominated by a handful of companies, and the Anthem-Cigna and Aetna-Humana Merger may concentrate the insurance markets even more.

The American Hospital Association sent a letter to the Justice Department saying that the Aetna-Humana deal will create serious and widespread competition harm to Medicare beneficiaries as it reduces options for private Medicare Advantage plans. The proposed mergers could decrease competition in 154 metropolitan areas in 23 states.

AMA president Dr. Steven J. Stack suggests that the Obama administration must review the proposed mergers since a lack of competition among health insurer markets is not good for patients and physicians.

"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," said Stack.

As noted by the Market Watch, the impact of the mergers would exceed federal antitrust guidelines. The U.S. Department of Justice states, "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."

According to USA Today, Aetna CEO Mark Bertolini, the one who proposed the major insurance company merger agreement, also raised the company's minimum wage, plans to increase the contribution for its worker's health care, and saw an increase in stock by 30% since January.

On a closer look at the mergers, the Anthem-Cigna merger would improve market power in 85 cities in 13 states. Meanwhile, the Aetna-Humana merger is seen to improve the market power in 15 cities in 7 states.