Implications of proposed health insurer mergers: 6 things to know

The Department of Justice and the Federal Trade Commission's evaluation of three proposed mergers between health insurers — Aetna-Humana, Anthem-Cigna and Centene-Health Net — has left many considering the deals' potential implications.

Three researchers from Leavitt Partners — Austin Bordelon, Douglas Hervey and David Muhlestein — published a report in Health Affairs Blog detailing potential effects of the proposed mergers. To calculate relevant data, the authors used the Herfindahl-Hirschman Index, a commonly accepted measure of market concentration.

Here are six things to know about the possible outcomes, impacts and implications of the proposed mergers.

1. The authors detail the three potential outcomes of the merger review process. Each proposed merger is being reviewed individually by the DOJ and the FTC. One outcome of the review process is that "regulators would allow these deals to go forward, unencumbered, as proposed." Alternatively, regulators may completely block the proposed mergers. A third possible outcome is that regulators would allow the deals to go through, but only in specific markets in which the two insurers in the merged company are not dominant.

2. Georgia, Connecticut and Colorado may experience 40 percent or higher increases in commercial insurance concentration if the mergers are finalized. According to researchers, this is "due to the combined market footprint the mergers create." Georgia would experience a 52 percent increase, Connecticut would see a 44 percent increase and Colorado would have a 42 percent increase. The next states in line are Virginia with a 34 percent increase and New Hampshire with a 30 percent increase.

3. Regarding Medicare Advantage commercial concentration, four states — Kansas, Alaska, Iowa and Ohio — could experience 60 percent or higher increases. Because Humana's national Medicare enrollment totals 3.2 million and Aetna's is 1.26 million, the merger between the two would cause an increased commercial Medicare Advantage concentration. If the merger goes through, Kansas would see a 98 percent increase in market concentration, while Alaska would experience an 89 percent increase. Iowa would have a 68 percent increase and Ohio would have a 64 percent increase.

4. The mergers aren't expected to dramatically affect Medicaid managed care markets. Kentucky would be the only state to experience a double-digit increase in concentration — 18 percent. Texas and Florida would experience small increases of 6 percent and 4 percent, respectively. Regardless, the authors highlight how Aetna CEO Mark Bertolini and Humana CEO Bruce Broussard have said the mergers would help their Medicaid businesses.

5. If the mergers go through, Georgia, Florida, Connecticut, Colorado and California would have the largest increase in commercial administrative services only concentration. Since Cigna has many contracts with employers in these states, the authors attribute the increase to the Anthem-Cigna deal. Georgia would see the largest increase of 48 percent, followed closely by Florida and Connecticut, both with 47 percent.

6. The authors outline three implications of the mergers. If the mergers are approved, the market should consider "whether payers will pressure providers to bear greater risk within value-based payment arrangements in an attempt to improve the delivery of care." The healthcare community should also keep in mind how large insurer consolidation could cause consolidation in smaller regions. Finally, the merged insurers will likely reduce competition in the insurance exchange marketplaces by commanding significantly greater market share.

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