Are insurer deals good for consumers, employers?

Health insurer Anthem's $54 billion deal to acquire Cigna could help keep health care costs from continuing to rise, as the insurers will have more negotiating leverage with doctors and hospitals, but the effect on employers remains unclear, say health care experts.

Aetna announced its agreement to acquire Louisville-based Humana for $37 billion earlier this month. An insurance industry with a few giant players isn't necessarily the best scenario for consumers, but the two deals really just turn it from an industry with four big players to one with three (United Healthcare is the third).

While it would be easier for the much-larger insurers to increase premiums to employers, they could really "squeeze payments to providers," says Farzan Bharucha, a health care strategist with consulting firm Kurt Salmon.

"Hospitals will feel a lot more pressure," says Bharucha, who represents health care providers, including hospitals.

Consumer advocates plan to "fully engage" with regulators reviewing the latest deal, says Tam Ma, policy counsel with consumer coalition Health Access California.  
Anthem, which already runs Blue Cross and Blue Shield insurance plans in 14 states and Medicaid managed care plans through the Amerigroup brand in 19 states, already has raised concerns with advocates. Ma notes that California regulators found Anthem's rate increases to be unreasonable, and says its provider directories are inaccurate and unreliable, making it difficult for consumers to find in-network doctors who are accepting new patients.

"Anthem should not allowed to get bigger without getting better," said Ma in a statement. " If an insurer can't follow the most basic consumer protections, why should it be allowed to control even more of the market?"

Whatever the impact, it won't be an immediate one. Neither the Aetna nor Anthem deal is expected to close for at least a year and perhaps late in 2016, due in large part to expected scrutiny from federal antitrust enforcers. That means they won't affect insurance premiums or plan choices in 2015 or 2016.

By 2017, the mostly likely effect will be to offset expected insurance premium growth that year so it shouldn't be noticeable, says Tucker Sharp, a senior vice president at Aon Health.

The American Medical Association warned against the consolidation, however, noting that three out of four metropolitan areas are already rated as "highly concentrated," according to its analysis of federal market concentration guidelines. AMA, which represents doctors, found 41% of metropolitan areas had a single health insurer with a commercial market share of 50% or more.

USA TODAY has found that areas with this little insurer competition tended to have the highest deductibles in states that use the federal Healthcare.gov exchange.

Regional companies such as Kaiser Permanente, which provides both the insurance and the health care for its members, may benefit from the consolidation and gain opportunities to expand, says Sharp.

"They can fill in the gaps nicely," he says.

There are also a increasing number of upstart players, such as insurer Oscar, which charges a flat monthly fee to cover all of consumers' health care costs, and new opportunities for the most innovative companies that are changing the way health care is delivered.

Led by the federal government in Medicare, doctors and hospitals are increasingly being paid based on the quality of the care they receive rather than the quantity of procedures, which tends to benefit the companies that aren't wedded to an old way of doing things, says Bharucha. He cites CVS Health, which recently announced plans to acquire Target's pharmacies, and Apple, whose watch could eliminate the need for patients to go to the doctor for monitoring.

"It's almost always easier for the newer entrants to innovate," he says. "They don’t have an old model to protect."

Still, there's some concern among companies.

Nearly half of employers said they expect current and future insurer consolidation will lead to fewer health plan options for them and their employees, according to a recent survey by Aon Health. A third said it will not greatly affect their organization or employees.

But there isn't likely to be much more major insurer consolidation, Bharucha says. Antitrust enforcers wouldn't be likely to permit it. Still, it was recently looking like there was no end in sight.

Anthem had also considered acquiring Aetna. Cigna had rebuffed previous offers by Anthem.

The insurance industry's mating dance was moving so fast that the boards of Anthem and Cigna had to "be careful in this situation," said mergers and acquisitions attorney Steven Haas.

"You want to make sure the deal makes sense for shareholders, but in a rapidly consolidating industry, there is great risk that you end up being the last person standing and unable to compete," says Haas, a partner at Hunton & Williams. "There was a chance of being left out in the cold."