Insurance merger risks to physicians

Editor’s Note: Welcome to Medical Economics' blog section which features contributions from members of the medical community. These blogs are an opportunity for bloggers to engage with readers about a topic that is top of mind, whether it is practice management, experiences with patients, the industry, medicine in general, or healthcare reform. The series continues with this blog by Carol Gibbons, RN, BSN, NHA, who is CEO of CJ Consulting, which specializes in healthcare revenue cycle management. The views expressed in these blogs are those of their respective contributors and do not represent the views of Medical Economics or UBM Medica.

If you have been following the articles regarding the mergers of Anthem with Cigna and Aetna with Humana, you know there is much speculation by all the experts about whether the deals will ever finish. 

Further reading: DOJ files ruit to block two mega-mergers of health plan giants

Bloomberg News published an article July 19^th stating that the Justice Department is close to filing suits to stop these mergers. If you are on the side against these mergers, don’t get your hopes up just yet. Even though the Justice Department did, in fact, file these lawsuits against the Anthem/Cigna and Aetna/Humana mergers, this process will take most of the year to come to some resolution.

The biggest challenge to the mergers is the risk that they will cause a reduction in choice for patients and ultimately lead to higher premiums. Providers are concerned that these mergers will lead to a reduction in reimbursement. like the growth of UnitedHealthcare has caused. 

I credentialed a new primary care provider in 2015 and UnitedHealthcare offered her a contract at 80% of the Medicare rate.  The dramatic reductions in reimbursement over the last 5 years have caused primary care physicians especially to look for ancillary services that can help shore up their bottom lines so they can continue to provide good healthcare to their patients.

 It is very difficult for a physician to survive financially on the reimbursement for visits alone regardless of the quality of that care. 

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Recently a group of Democratic senators asked the Justice Department to look more closely at these mergers.  As reported in the Hartford Courant, a letter to the Justice Department signed by these prominent senators, "We are deeply concerned by the detrimental impact that both of these mergers would have on premium prices, jobs and health care costs for consumers and businesses. In addition to the antitrust legal standard, a critical point to note is the harmful impact these mergers could have on job cuts, wage stagnation, higher health care prices, and the nation's overall economy.''

Next: Is all this true?

Is all this true?   Certainly the market is pulling back from recommendations to purchase stock of any of these companies at the moment.  Anthem and Cigna say their deal is moving forward without difficulty despite articles that outline some fighting over drug contracting and the exit of some of Anthem management as outlined in a Wall Street Journal article from May. However, according to Law.com Anthem took out a full page ad on July 26^th confirming they are committed to defending the merger.  CEO Joseph Swedish told investors as well, they will fight the lawsuit and criticized the DOJ for not considering the benefit to consumers.

Multiple states have complained to the Justice Department about the planned mergers because they believe it will limit patient choice. Certainly some of this complaining is related more to the potential loss of jobs in their community, if the mergers take place.

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It is true that as the companies plan the merger, administrative personnel will lose their jobs and processing centers will be closed. Yes, corporate offices will be combined and consolidated to new locations, which will impact revenue in communities where there are large numbers of employees currently. 

Some communities will benefit and some will suffer a significant loss in revenue.  However, the new, merged company must cut administrative cost to survive.  To claim that it will cause “wage stagnation” might be overreach.

It may be true that rates will increase if there is less competition, and that is certainly a consideration from the Justice Department’s perspective.

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 To offset this concern, Anthem, Cigna, Aetna, and Humana may have to divest some of their current products in some markets.  For example, in some markets, Aetna will have to divest its  Medicare Advantage product because the market is made up mostly of Aetna and Humana products.  However, other carriers are already proposing to enter those markets and continue to provide competition.  This might give smaller carriers a chance to grow their market share and become more competitive.

Next: "I am not convinced these mergers alone will increase the cost of healthcare"

An article in Business Insurance News spoke to this issue.

“Concerns about the Aetna and Humana merger largely revolve around its impact on competition in the Medicare Advantage market. Aetna and Humana combined would cover about 4.5 million out of a total 17.6 million individuals enrolled in Medicare Advantage plans - nearly a quarter of the market. But the combined organization would cover only 8% of the entire Medicare market, including traditional Medicare and Medicare Advantage, according to the Center for American Progress,” the article says.

I am not convinced these mergers alone will increase the cost of healthcare. United Health Group and its Optum division have been successful in reducing the cost of care, especially in the government market, and improving care delivery to patients. 

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They have proven that it is possible to render good care and keep patients out of the hospital through a smaller panel of providers. The real downside in this comes with the reimbursement reductions to providers and hospitals. The new merged companies could have such a large number of covered lives in a specific market that the hospital or physician practices are forced to agree to reduced payments because they cannot afford to lose a large volume of business.

I am not sure that these mergers alone will affect the nation’s economy.  If rates increase enough that patients start canceling their insurance, it could increase the number of uninsured people.

That would affect the overall economy; however, the issues with the ACA Exchange products might have a greater impact on the economy.  Look at the number of carriers and CO-OP plans who are pulling out of the Exchange markets, and the number of remaining carriers who are looking to increase premiums. As many healthcare providers predicted at the beginning of the ACA Exchange enrollment, the people who enrolled continue to be high utilizers of healthcare services. This continues to be the struggle for carriers and changes to the enrollment process are needed to shore up these products.

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As we move in to the election cycle, there is a significant amount of uncertainty in the market as it relates to investment in healthcare stocks.

 In fact, Quin Foley in an article on Seeking Alpha recently reversed his “buy” recommendation and recommended instead that investors hold off on purchasing shares in United Health Group.

Next: Issue now could have even greater impact on the market

 “While we believe that UNH will benefit over time from favorable secular trends in healthcare, it is worth waiting until after the election to get a clearer perspective on the outlook going forward,” he said.   This trend has also been seen in the lower price for Anthem, Cigna, Aetna, and Humana as the Justice Department signaled that they would file lawsuits to stop the mergers. 

At this point, there are too many factors involved to accurately predict whether these mergers will proceed. Other carriers such as Centene and Wellcare are starting to bid for the assets whose divesture may be required to get approval for the merger as reported in Reuters.

“WellCare Health Plans Inc (WCG.N) and Centene Corp (CNC.N) have made competing offers for the Medicare Advantage insurance plans that Aetna Inc (AET.N) looks to shed in seeking clearance for its acquisition of Humana Inc (HUM.N), people familiar with the matter said,” Reuters reported.

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 However, on Wednesday, August 3, Aetna and Humana announced that Molina would purchase the Medicare Advantage business and Centine said they were not interested in this business.

Another factor that could impact the process will be the presidential election because the two parties have a very different opinion on the future of ACA Exchange products.

I believe as carriers continue to exit the ACA Exchange market because of losses, those issues could have an even greater impact on the market than the mergers.  In fact, Aetna reported in the second-quarter earnings report Tuesday, it is considering pulling back from their expansion plans for the exchange market in 2017.  They will evaluate further participation in the current footprint which provides coverage in 15 states.

 As a healthcare business owner, the thing you can do to impact the process is to communicate with your elected officials regarding your thoughts on how the process should proceed or be stopped.  When you have an opportunity to give comment to current proposed regulation, take that opportunity.  Work with your professional organizations to make sure your voice is heard.

As providers, your most important task is to communicate to patients that you are committed to providing the best care possible, no matter what happens with the mergers or the election.

They need your reassurance and confidence, as we move forward, that the focus you have on their care will not change.  You need their confidence in your business to maintain your market share during this turmoil.