The gray area of payer consolidation

Since news broke this summer of the proposed mergers between four insurance giants, voices representing payers, providers and consumers have sounded out about the benefits and drawbacks that such major consolidations would have on the insurance industry, and healthcare as a whole. In the most recent developments, the American Medical Association (AMA) has sent a letter to the Department of Justice objecting to these acquisitions, while a consumer group has also voiced its opposition.

The AMA cautions that reduced competition in the insurer market would drive down payments to providers, resulting in doctors having less revenue to invest in new technology, and less time to spend face-to-face with patients. Other organizations, including the American Hospital Association and the American Association of Family Physicians, have also voiced concerns.

For their part, the insurers argue that since their profits and administrative expenses are capped by the Affordable Care Act, growing via acquisitions is their most effective option for diversification and ensuring a strong bottom line. They also point to “soaring prices of prescription drugs and medical services” as more pressing challenges.

Looking beyond this back-and-forth, though, some analysts are pointing out that payer consolidation holds promise in improving patient health. According to the Boston Consulting Group, bigger insurers would be able to pool and analyze vast amounts of data, and experiment more effectively with models of care management. As some Medicare Advantage insurers have found, providing strong care management and moving away from traditional fee-for-service models can contribute to lower mortality rates and improved overall health for patients. And in providers’ admissions and billing offices, payer mergers may simplify matters by enabling staffers to work more efficiently.

While the Department of Justice and state regulators review the pending insurance deals, the “merger frenzy” is predicted to continue—with hospitals, health systems and other provider groups seeking their own versions of strength in numbers. It may take some time for the results to be fully understood, but the good news is that these bigger entities have the potential to find new ways of lowering costs and improving health.