Most health policy experts knew, and many warned, that the Affordable Care Act would lead to massive consolidation in the health care industry, including hospitals, physicians’ practices, and especially health insurers. Now the Justice Department is pushing back by opposing the mergers of four large health insurers—Aetna with Humana and Anthem with Cigna —as they try to survive the Obamacare wasteland.
The Obama administration defended its opposition by claiming the mergers would reduce competition. Attorney General Loretta Lynch explained, “If allowed to proceed, these mergers would fundamentally reshape the health insurance industry.” That’s rich, since nothing has reshaped the health insurance industry more than Obamacare—and by design.
But government antitrust litigation is almost always about politics rather than economics. And that’s why free market advocates tend to be skeptical of most government antitrust efforts; companies, not the government, are in the best position to judge whether a merger would be beneficial.
And politics is certainly at work in this instance. President Obama promised the country that his health care legislation would increase competition and lower health insurance premiums. Now that just the opposite is happening, his administration is trying to limit the fallout and appear to be fighting for the consumer. But blocking the mergers will likely hurt consumers and competition.
Health insures are fleeing the Obamacare exchanges because of financial losses. A recent McKinsey & Co. survey found that health insurers selling in the individual market—where individuals buy their own coverage, usually through Obamacare exchanges—lost $2.7 billion in 2014. Those loses only compounded in 2015.
The Hill reports that Humana “is pulling out of Obamacare plans in all but a handful of states after a year of nearly $1 billion in losses.”
Aetna said it lost about $140 million on the individual market in 2015.
The Texas Blues Cross parent company, which controls Blues plans in five states, lost a reported $2 billion—$720 million just in Texas.
Oscar, a start-up health insurer that was supposed to bring new thinking to the individual health insurance marketlost $105 million on Obamacare exchanges in 2015—and that was in just two states, New York and New Jersey.
UnitedHealthcare, the largest health insurer, reported last January that it lost $720 million in 2015 selling individual health insurance on the Obamacare exchanges. And about $1 billion when 2014 and 2015 were combined.
And 16 of the 23 nonprofit Obamacare co-ops—which were the left’s consolation price for not getting their “public option”—have gone under, with more collapses on the way.
The left has long wanted to “take the profits out of health care,” and Obamacare seems to be doing exactly that.
Obama officials dismiss the health insurer losses, claiming that many of the insurers are still profitable. But that’s because health insurers often have several lines of business, some of which may be profitable even as they lose hundreds of millions of dollars selling in Obamacare exchanges. No responsible board of directors will let such losses continue indefinitely.
Larry Levitt of the Kaiser Family Foundation has been quoted as saying, “Something has to give. Either insurers will drop out or insurers will raise premiums.” And that’s exactly what we’re seeing.
Nationwide, there was a 12 percent decline in plans in 2016 as compared to 2015, and that includes a 40 percent decline in PPO plans. There will be even more exits in 2017.
Prior to Obamacare there were 18 insurers offering individual coverage in Kansas. Today there are three.
The Obama administration initially praised health insurance competition in Maricopa County, Arizona. This year there were eight plans available on the Obamacare exchange; next year there will only be four—unless Aetna drops out, too.
And insurers that choose to remain are increasing premiums. Texas Blue Cross has requested an increase of up to 60 percent for its 2017 premiums, and Arizona Blue Cross requested a 65 percent increase.
So the question isn’t whether the four insurers seeking to merge provide more competition than two? The real question is whether any of those insurers will continue to sell in the exchanges if they aren’t allowed to merge?
We know Humana, without the merger, is pulling out. Aetna claimed for months it would remain in the Obamacare exchanges, but now issaying it may scale back. And Anthem announced recently that it will only expand into other exchanges if it’s Cigna merger goes through.
In other words, the Obama administration’s efforts to keep four insurers from becoming two may mean that only one or none will continue selling on the Obamacare exchanges.
Expect to see even fewer insurers participating and higher premiums as financial losses increase, especially if the Obama administration continues its efforts to stop money-losing insurers from merging.
Policyholders will likely be receiving the notice that their premiums are rising or policy is being canceled in September or October—just before the election.