The recent merger agreement between UnitedHealth Group and Health Net, and numerous other rumors about potential mergers and acquisitions within the health insurance industry, has raised concerns among state and national medical groups who say consolidation will likely hurt consumers and physicians in Connecticut.
“The Connecticut State Medical Society is watching developments related to Health Net very closely,” said Matthew Katz, executive vice president of the Connecticut State Medical Society. “Physicians know that the consequences of more market consolidation include growing domination of large health insurers. That rarely bodes well for patients or contracting physicians.”
Katz said Connecticut’s health care market is already highly consolidated with three or four insurers that dominate the region. He said more mergers would create fewer choices for patients and less ability for physicians to negotiate their rates. It would also mean a small number of insurers will have the ability to set market rates in the state.
“It’s costs savings afforded to insurers at the detriment of patients and physicians,” Katz said.
UnitedHealth Group, which has major operations in Connecticut, will pay about $510 million to buy Health Net’s northeastern licensed subsidiaries, which have 578,000 members in Connecticut, New York and New Jersey.
Under the deal, UnitedHealth agreed to purchase the rights from Health Net to assume its commercial members as they renew coverage.
UnitedHealth said it also will pay Health Net $60 million for its Medicare and Medicaid businesses.
Katz said he is concerned because it is possible that employers who were Health Net customers will not have access to care through UnitedHealth, since UnitedHealth is not purchasing Health Net’s provider network. As a result some Health Net customers may not be offered coverage when their current plans run out or may need to change physicians.
Daryl Richard, a spokesman for UnitedHealth said the company’s recent acquisition “is the best option for Health Net’s Northeast customers who renew with UnitedHealth, because it broadens choice and access to quality care with one of the largest local and national networks and a full range of affordable products.”
Additionally, Richard said the majority — approximately 95 percent — of Health Net physicians, hospitals and other health care professionals already participate in UnitedHealth’s network, “so we anticipate a smooth transition for employers and their employees who renew with UnitedHealthcare.”
He added that Health Net providers, who are not currently participating with UnitedHealth, will have the opportunity join their network.
Over the past few months rumors have been plentiful about potential mergers and acquisitions within the health insurance industry. Last week for example, The Wall Street Journal reported that Aetna is shopping its pharmacy benefits management business, which had about 11.2 million members at the end of the second quarter.
Another health insurer, Indianapolis-based WellPoint Inc., sold its pharmacy benefits management unit to Missouri-based Express Scripts Inc. in April.
Aetna has also been rumored to have been interested in acquiring Kentucky-based Humana Inc., while UnitedHealth has been linked to Maryland-based Coventry Health Care Inc.
Blaine Bos, a worldwide partner at Mercer, a benefits consulting firm, said that consolidation in the health insurance industry isn’t new and has been going on for about two decades but recent merger talks are being driven by uncertainty in health care reform and the economic downturn.
President Obama wants to create a public option for health insurance which would increase competition and potentially make it harder for smaller health plans to compete. There is also concern that Obama will make cuts to Medicare and Medicaid spending over the next decade, which would also negatively impact the industry.
Meanwhile, as the ranks of the unemployed increase, insurers are seeing declining enrollments, Bos said.
As a result smaller, regional insurers are deciding that they can no longer remain independent, while larger insurers are looking to boost their enrollment.
“There used to be dozens of companies in this space but today there are only three or four major players,” Bos said.
Insurers say consolidation leads to greater efficiency because it allows them to generate larger patient pools, which in turn can help them negotiate lower payments with medical providers and lower premiums for consumers.
But the CSMS and American Medical Association (AMA) don’t believe that’s the case
According to a recent study by the AMA the vast majority of health insurance markets in the U.S. are dominated by one or two health insurers. In 44 percent of the 315 metropolitan markets studied, at least one insurer had a combined market share of 50 percent or greater while 16 percent of the cities had at least one insurer with a combined market share of 70 percent or greater.
Meanwhile, employer health insurance premiums increased by 5 percent in 2008 — two times the rate of inflation, according to the Henry J. Kaiser Family Foundation. The annual premium for an employer health plan covering a family of four averaged nearly $12,700. The annual premium for single coverage averaged over $4,700.
“Health insurers claim that eliminating rivals through mergers creates greater efficiency and lower health care costs, but this just isn’t the case,” James Rohack, president of the AMA, said in a written statement. “Patient premiums, deductibles and co-payments have soared in this increasingly consolidated market.”
Richard, of UnitedHealth, said health insurance is highly competitive in the local markets. He said Connecticut, for example, has a number of options available to employers, including Wellpoint/Anthem, Aetna, Cigna, Connecticare and UnitedHealth.
