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Health Insurance Mega-Mergers Attract Powerful Enemy

The Huffington Post The Huffington Post 11/11/2015 Jeffrey Young
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WASHINGTON -- The nation's leading physician organizations sent a letter on Wednesday to federal antitrust enforcers asking them to block mergers between giant health insurance companies.

The American Medical Association recommends the Department of Justice forbid two pending deals that would combine Anthem and Cigna into one company and Aetna and Humana into another, which critics say would reduce competition in the health insurance sector.

"The AMA has concluded that these mergers are likely to impair access, affordability and innovation in the sell-side market for health insurance, and, on the buy side, will deprive physicians of the ability to negotiate competitive health insurer contract terms in markets around the country. The result would be detrimental to consumers," AMA CEO James Madara wrote in a 17-page letter to William Baer, the assistant attorney general for the Department of Justice Antitrust Division.

These proposed mergers are subject to antitrust reviews by the Justice Department, the Federal Trade Commission and state regulators. Congress has held hearings on the deals, and Democratic presidential candidate Hillary Clinton has expressed skepticism. Previous research indicates premium increases typically follow mergers between health insurance companies. The American Hospital Association also opposes these deals.

The health insurance companies counter that these mergers are critical to their financial futures, and that consumers will benefit as economies of scale enable the combined firms to cut expenses, and as these mega-insurers are able to more widely implement programs designed to reduce costs and improve health care quality. 

The health care industry at large has been consolidating in recent years as companies seek to constrain costs at a time when government programs have become less generous, and to maximize market power. Mergers and acquisition activity in the hospital sector also has been brisk

Notwithstanding the AMA's and the AHA's warnings about the potential negative effects of health insurance mergers on consumers, such moves also would serve to diminish the ability of doctors and other medical providers to charge higher fees.

Spokespeople for Aetna, Anthem, Cigna and Humana didn't immediately respond to emails requesting comment on the AMA's letter.

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