Mergers Will Threaten Both Competition and Health Care Progress

July 15, 2016

 

The Anthem-Cigna and Aetna-Humana mergers are currently in trouble because they will harm competition in health insurance markets across the nation and negatively impact consumers. Despite Herculean efforts by the merging companies, they have been unable to successfully rebut these facts. However, these proposed acquisitions will not only harm competition and consumers, but also threaten the progress in health care that has taken place over the past few years. The Affordable Care Act (ACA) has wrought significant progress over the past few years, but it is dependent upon robust competition in health insurance markets. These mergers threaten that competition and the ACA’s work.

 

As this moment, the Department of Justice is reviewing both mergers, and according to reports believes they will greatly cut down on competition. National and state consumer groups, the American Hospital Association, the American Medical Association, U.S. Senators, and antitrust regulators have all come out in opposition to the deals.

 

Numerous studies have outlined exactly how competition benefits consumers and how health insurance consolidation almost always leads to higher premiums and out-of-pocket spending. Mergers between health insurers, especially such massive companies as Anthem, Cigna, Aetna, and Humana, obviously reduce competition, which leads to lower prices, improved products and benefits, and increased innovation.

 

On a broader level, these mergers threaten the progress resulting from the Affordable Care Act. Evidence from past mergers strongly suggests that if the mergers are allowed to proceed, these companies will use their increased market power to raise prices, cut corners on healthcare, and focus solely on increasing their profits instead of providing better service to consumers. There will be less competition and consumers will pay more. The ACA has ensured that many individuals now have health insurance but it ultimately depends on strong competition in health insurance markets. As we previously noted, Kathleen Sebelius stated the ACA was designed to encourage additional firms to enter and compete in health insurance markets and to create an overall marketplace structure. She noted that “competition is actually a great price lever, and competition gives not only more choices to consumers but typically better prices to consumers.”

 

The merging companies claim that these acquisitions will increase choice and affordability. How? When pressed by state Insurance Commissioners and U.S. Senators, their responses have been incomplete, evasive, and nonsensical. That’s because, as the ACA recognizes, competition is the engine that drives consumer benefits.

 

In its evaluation of the mergers, DOJ should consider the impacts both on competition and on how the reduction of that competition will threaten the Affordable Care Act—and our overall health care system.

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