Despite rising concerns over insurance mega-mergers, some industry experts are urging consumers to look at the benefits of consolidation.
In their opinion piece for The Wall Street Journal, authors Victor R. Fuchs, PhD, a Stanford University professor, and Peter V. Lee, executive director of California's state-run exchange Covered California, believe in a healthier outlook on insurance mega-mergers.
Here are four reasons consolidation in the insurance market could be beneficial, according to Dr. Fuchs and Mr. Lee.
1. Insurers can aid in obtaining lower prices for consumers. Because the Affordable Care Act requires insurers to spend at least 80 percent of every premium dollar on consumer medical claims, insurance companies can act as a counterweight and help consumers receive lower prices, according to Dr. Fuchs and Mr. Lee. The authors claim large insurers could lower prices for consumers by offsetting the bargaining power of providers.
2. Provider consolidation and pharmaceutical prices pose a greater threat. In California, the average premium increase was 4 percent statewide. While the average increase in northern California was 7 percent, the average increase in southern California was only 1.8 percent. Dr. Fuchs and Mr. Lee attribute the difference to higher hospital and physician prices in the northern part of the state. Additionally, the authors cite the "ability of pharmaceutical and biotechnology companies to charge whatever the market will bear" as a threat.
3. State exchanges can also assist in the insurance market operation. For example, Covered California requires insurers to provide benefits as well as minimum essential coverage. By forming standard benefit designs, health plans compete on price and provider availability. Consumers can then make direct comparisons on the exchanges.
4. Insurance companies can help change how healthcare is paid for and delivered. As part of the effort to shift from volume-based care to value-based care, some insurance companies have begun to work with ACOs, which provide care for a specific population or an annual fee.