2016 Health Insurer Merger Frenzy 113
mergers rarely, if ever, lead to lower premiums for consumers.” 110 Dafny further established that the Aetna-Prudential deal “mostly translated into bulked-up negotiating power over hospitals and doctors.” 111 The increase in cost could be justifiable if services or products significantly improve, but the concern is that these proposed mergers will increase costs without a correlating increase in efficiency or quality. Consolidation may also have a much larger economic impact on consumers beyond just premiums. Dafny’s post-merger Aetna-Prudential study also found a reduction in wages and healthcare employment in the areas where the two insurers held significant market power. 112
B. Lack of Competition
While provider consolidation is a substantial factor in pushing insurers to gain additional market power, some argue that the insurance mergers are a reaction to the ACA.113 Wharton Professor of Healthcare Management, Mark Pauly, believes the insurance mergers are a way for insurers to fight back against the competition mandated through the ACA. 114
This is a kind of counterattack on the part of insurers saying, well, if you’re going to try to stimulate competition, we’re going to counteract by reducing the number of competitors, so at least we won’t have to worry about as many competitors stabbing us in the back by cutting prices if we can buy them up or acquire them. 115
The ACA-createdexchanges allowconsumerstoopenlycompareinsurers, encouraging insurers who vie for this population’s premiums to provide competitive options in not only price but also in value. 116 Seen as an attempt to combat this designed competition, the insurance industry’s proposed mergers have sparked increased criticism. For instance, the American Medical Association (AMA) openly expressed criticism of the proposed
110. Bob Herman, Senators Grill CEOs of Aetna, Anthem Over Competitive Effects of Deals, MODERN HEALTHCARE (Sept. 22, 2015), http://www.modernhealthcare.com/ article/20150922/NEWS/150929962 [hereinafter Herman, Senators Grill CEOs]. 111. Id. 112. Dafny, supra note 22. 113. Sarah Ferris, GOP Blames ObamaCare for Health Insurance Merger-Mania, THE HILL (July 8, 2015, 6:00 AM), http://thehill.com/policy/healthcare/247161-gop-pounces-on- health-insurance-merger-mania. 114. What’s Driving Health Insurers’ Merger Mania?: Mark Pauly Discusses Proposed Health Care Insurance Company Mergers, WHARTON PODCAST (June 23, 2015), http://knowledge.wharton.upenn.edu/article/whats-driving-health-insurers-merger-mania/ [hereinafter WHARTON PODCAST]. 115. Id. 116. Cusano & Lucia, supra note 25.