Mergers among health insurance companies could drive rates skyward

health insurance companies profits

The American Medical Association has said that the reduction in competition will raise rates.

The American Medical Association (AMA) has recently released the results of a study that claims that most health plan markets in the United States are currently led by a small number of insurance companies that may become even fewer with the current trend of mergers and acquisitions.

The organization representing doctors and hospitals is criticizing the impact of this market shrinking.

The reason is that they feel that if the current intentions of insurance companies to merge with one another or to acquire each other continues, then it will lead to far less competition and, therefore, considerably higher prices for consumers. This study is predicting that this will be the impact of such insurer intentions such as Anthem’s plan to acquire Cigna, as well as the proposal that has been put forward that would have Aetna purchasing Humana.

These worries about the trend of merging insurance companies were sent to the Justice Department.

health insurance companies profitsThe American Hospital Association addressed a letter to the Justice Department that explained that if Aetna is allowed to proceed in buying Humana, the result “threatens serious and widespread competitive harm,” to people on Medicare as it would decrease the number of options available to them for the private Medicare Advantage plans. Over 30 percent of the beneficiaries of Medicare (of which there are an estimated 55 million across the country) have enrolled in these types of private plans, which offer them a traditional Medicare alternative.

According to the AMA, if the mergers are allowed to go through as intended, the insurance industry competition will drop in as many as 154 different metropolitan areas across 23 states. Within the American Medical Association’s study, it cited federal antitrust guidelines which state that “Mergers should not be permitted to create, enhance or entrench market power.”

It also added that the federal antitrust guidelines say that the definition of a market power enhancing merger is one that will probably lead one or more insurance companies “to raise price, reduce output, diminish innovation or otherwise harm customers as a result of diminished competitive constraints.”

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