More Visibility for Health Plan Mergers, Please

More sunshine -- always better

More sunshine — always better

by James A. Bacon

Virginia consumers are not particularly torqued about two proposed mergers between leading health care insurers — only 20% of respondents to a poll sponsored by Virginia Consumer Voices for Healthcare (VCVH) were even aware of the proposals — but that didn’t stop 87% from being “very” or “somewhat” concerned by the impending consolidations when told about them. So reports the Richmond Times-Dispatch.

Virginia Consumer Voices released the survey results as the State Corporation Commission and other regulatory agencies around the country study the impact of the mergers on competition in state health care markets. The consumer group and the Virginia Hospital and Health Care Association, among others, have expressed concerns that the mergers would reduce competition in Virginia, increase costs to patients and reduce innovation in the marketplace.

All four companies affected by the proposed mergers belong to the Virginia Association of Health Plans, which lists ten members. Anthem Blue Cross Blue Shield has proposed buying Cigna, while Aetna has proposed taking over Humana Health Insurance.

Virginia Consumer Voices says the mergers would create near-monopolies in certain segments of the health care sector:

These mergers would substantially reduce competition and create large overlaps in Virginia in a number of different insurance products including commercial, ASO, and Medicare Advantage. A combination of Anthem and Cigna would create an entity with just under 72% share of the Virginia ASO market, and a combination of Aetna and Humana would have 66% of all seniors with a Medicare Advantage plan in Virginia.

The mergers would also increase costs for consumers. The merging companies have requested significant premium increases within Virginia, and studies on health insurance mergers have found significant premium increases for consumers post-merger.

Anthem, the dominant health care provider in Virginia, has not been especially aggressive here in the Old Dominion in justifying the project. A website at www.betterhealthcaretogether.com seems more concerned with pitching the merger to shareholders than consumers.

However, in testimony before Congress, Anthem CEO Joseph Swedish argued that the role of health care insurers is changing.

Health care in our country is rapidly evolving, driven by the needs of consumers, who demand change from all sectors — providers and payers. … No longer is it enough for health insurers to serve as financial stewards in the health care delivery transaction; we must now assist consumers as they interact with the health care system. … We must go beyond paying claims, instead partnering with providers by offering human and financial resource support, actionable data analytics, and tools that further their efforts to focus on the health of their patients, while shifting from volume- to value-based payments. And above all, we must help all stakeholders — providers, consumers, employers and brokers — change from a system that has historically focused on sick care to one that promotes optimal health.

One driver of the merger is big data. Stated Swedish: “Anthem’s proposed merger with Cigna will result in the aggregation of useful information that can then be applied to bringing a better, more targeted product to consumers, and ultimately, improving the care that providers are able to deliver parents.”

Bacon’s bottom line: File this under “Eyes Glaze Over… But Very Important.” Every Virginian with private health care coverage, including Medicaid and Medicare plans administered by private companies, has an interest in the outcome. Health care costs continue to rise, and consumers should worry that industry consolidation will give insurance carriers more bargaining power in the marketplace and fatten their bottom lines. On the other hand, the only way to improve the quality of health care without bankrupting the country is through innovation — and private health insurers have plenty of ideas on how to change the system.

Virginia Consumer Voices and other groups are calling for the SCC to give the public a platform for airing diverse points of view. I agree. The more openness, transparency and public participation the better. We’re talking about the future of Virginia’s health insurance sector here. That’s too important to decide in the shadows.

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8 responses to “More Visibility for Health Plan Mergers, Please

  1. I kind of thought “transparency” was sort of an anathema to the free market anyhow.

    I’d say if we get the govt totally out of employer-provided health insurance and let the free market decide who to cover and who not to cover and how much to charge each person – … and forget transparency and all that “leftist” foolishness… we’ll move towards that free market we’re always touting as the way to reduce costs…

    right?

  2. Rather than permit competition-lessening mergers, why not allow insurance companies to form a non-profit database company that can allow members to view and use aggregate data from all members? Each member company could still use specific data for its covered individuals to serve those customers. Big business hates competition.

  3. re: ” why not allow insurance companies to form a non-profit database company that can allow members to view and use aggregate data from all members? ”

    who says those companies have to provide data to start with?

    • My assumption is that, since they argue big data (i.e., a larger database of information is important to achieving better and more efficient health care results, big health insurance companies would support solutions that allow them to have access to more data. Under such circumstances and given privacy protections that comply with regulations and reasonable operating costs, those companies would pool their data.

      On the other hand, this could be a make-weight argument and, thus, requires probing.

      • The difficulty in pooling media data is that Anthem Blue Cross Blue Shield has large enough market share that it can do analytics that its competitors cannot do, and therefore does not want to give away its proprietary advantage in the marketplace. The trick, then, is to pool all the other health care plans to create enough critical mass for non-Anthem insurers.

        • doesn’t this run totally counter to the conservatives oft-touted idea that an unfettered free market would spark competition which then would reduce costs?

          How would this work without the govt?

          is Big Data – Big Govt?

          • TooManyTaxes

            Larry, I don’t get the reasoning that big data equals big government. So long as pooling data did not constitute a violation of applicable antitrust or privacy laws, pooling aggregate data might be a good tool for health insurance companies and their insured. With advice of counsel, the interested parties would either create a corporation to do the pooling and provide access as agreed to beforehand or they’d hire a third-party contractor.

            Many competitive businesses participate in the standards-setting process without government compunction.

  4. @TMT – re: ” So long as pooling data did not constitute a violation of applicable antitrust or privacy laws, pooling aggregate data might be a good tool for health insurance companies and their insured.”

    TMT – what if companies don’t want to pool data?

    it’ sort of a moot issue anyhow – because most folks who get employer-provided don’t have a choice of which company anyhow.. right?

    so what is this really about? Bacon says we need more data about the companies so we can decide whether we should oppose mergers or not.

    So why are consumers entitled to that data in the first place if companies don’t want to provide it? And what is the justification for the government to interfere with the free market anyhow?

    Conservatives like you and Bacon keep saying that we would have better health care if the govt stayed out of the free market and let it work, right?

    Isn’t this the free market at work?

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