Health plan merger speculation worries doctors and hospitals


Talk of potential mergers in the medical insurance industry has doctors and hospitals worried about health plans having too much clout over consumer choices and prices.

Speculation has run rampant that some of the nation’s biggest health plans may be looking to consolidate, including a possible takeover of Humana Inc. by Aetna Inc., as well as UnitedHealth Group Inc.’s interest in Coventry Health Care Inc.

Already, 1 in 6 metropolitan areas in a 2008 study of more than 300 U.S. markets is dominated by a single health insurer that controls at least 70% of consumers enrolled in health maintenance organizations or preferred provider organizations, according to the American Medical Assn.


“It becomes difficult for patients to have choice and doctors to get their patients the care that is needed because a monopoly has been created,” said Dr. James Rohack, a Texas cardiologist and president-elect of the AMA. “Patients don’t have as many other options.”

Health insurers long have billed industry consolidation as a way to better control costs through efficiencies and leveraged buying power.

Also, the recession is giving health plans another reason to merge as they lose business because more companies and workers can’t afford coverage.

And the federal government’s expressed desire to further cut payments to insurers that receive Medicare dollars could fuel the industry’s push to consolidate.

With company-paid medical costs rising 8% to 10% this year for large companies, and higher for small businesses, health plans need more enrollees in order to spread out costs for their employer clients. A larger pool of patients gives benefits companies more power when negotiating payments with doctors and hospitals.

“It’s probably an interesting time to do a deal, given the low share prices,” said Todd Swim, a worldwide partner with Mercer, an employee-benefits consulting firm.


“Another issue that is plaguing the market now is the potential Obama healthcare plan and ramifications on those companies in the Medicare business.”

Health plans and the employers that hire them control the choices of doctors and hospitals. Providers worry that increased consolidation would add to their concerns about deteriorating reimbursement from government health programs as the federal deficit rises and state budgets tighten.

“In general, hospitals do worry if the super insurers get bigger,” said Melinda Hatton, general counsel for the American Hospital Assn., which represents more than 5,000 U.S. hospitals and affiliated health systems.

Humana, Aetna and UnitedHealth declined to confirm merger talks, and Coventry could not be reached for comment. America’s Health Insurance Plans, a lobby that represents the nation’s largest plans, also declined to comment.

Hartford, Conn.-based Aetna’s acquisition strategies have focused on ways to add products and service capabilities, among other things, that improve its “ability to manage medical cost and quality,” spokesman Fred Laberge said.

Because the Obama administration’s health-reform proposal encourages competition among health plans, some medical-care providers believe that the Justice Department’s antitrust division may look more closely at any merger.

With more health plans competing, Hatton said, it puts “pressure on the insurers to keep their offerings competitive and their prices competitive.”

Medical-care providers say the promise of efficiencies historically has not lowered premiums to consumers.

“The promise of saying we are going to come together and have administrative efficiencies and these other projected savings” never comes to fruition, Rohack said.

“Most of these [health plans] have different IT platforms and software, so it is a false promise of being more efficient compared to what their track records are.”