A new report by the think tank the Center for American Progress concludes that the merger of Aetna and Humana will mean higher Medicare Advantage premiums for seniors. The authors conducted analyses of premium prices in various counties and concluded that in counties where the two companies compete, premiums are substantially lower than in counties where they do not.
CAP notes that the Medicare Advantage market is already highly concentrated. Currently, Humana has 19% of the Medicare Advantage market, while Aetna has 7%. A combined Aetna-Humana merger would be larger than UnitedHealthcare, which is currently the largest Medicare Advantage insurer with 20% of the market. The merger would also include at least half of all Medicare Advantage patients in ten states and at least two thirds of all patients in five states.
Because of this increased concentration and reduced competition, the merger would increase Medicare Advantage premium prices. CAP analyzed premiums offered by Aetna and Humana in competing markets from 2008 to 2015. They found that the competition between the two companies reduces premiums. In counties where Humana and Aetna offer competing plans, Aetna’s average annual premiums are $155 lower than in counties where Humana does not offer a plan. Where the two companies are competing, Humana’s average annual premiums are $43 lower than in counties where they are not competing.
Additionally, in 2015 Aetna and Humana both offered Medicare Advantage plans in 562 counties in 28 states. This represents a substantial increase in competition between the plans over the last five years. If the companies do not combine, they will keep expanding operations and entering each other’s markets. A merger between Aetna and Humana would eliminate this current and future competition.
The proposed merger would also impact the individual health insurance market. Aetna and Humana both offer plans in eight states in the same rating areas. Currently, Aetna is the largest insurer on the marketplaces, and with its acquisition of Humana, it could again use its newfound market power to drive up premiums in those commercial markets.
Finally, the report also makes a critical observation: seniors in Medicare Advantage, when faced with higher costs due to the merger, will most likely not switch to traditional Medicare. A lessening of competition within the Medicare Advantage market is not excused by the existence of traditional Medicare. Seniors who utilize Medicare Advantage plans prefer the benefits and will not switch if the combined firm were to raise prices. Analysis of this merger should only focus on Medicare Advantage markets, not traditional Medicare.