Two big health insurance mergers are in the works: Aetna plans to buy Humana for $33 billion, and Anthem will take over Cigna for a whopping $54.2 billion.
The number of major health insurers in the US will soon be three, down from five.
So much for more competition, huh?
What’s happening in the health care delivery system mirrors the insurance industry. The biggest health care corporations are furiously buying up smaller hospitals and physicians’ groups.
From their points of view, it makes sense: Each side believes being bigger will give them the upper hand in reimbursement negotiations (that is, a larger share of this country’s seemingly unlimited supply of health care dollars).
And by the way, stock prices for all the involved insurance companies went up on news of the mergers.
I was interested in what Robert Laszewski, a health industry guru, had to say about all this.
Now we seem poised to enter a new era of even larger local health care delivery giants facing off against even bigger health plan giants. The hospitals merge and in turn the health insurers get bigger to counter the hospital’s new power. Now that the health insurers are on the verge of getting even bigger we’ll see more reason for doctors to get themselves into bigger systems of care and even more hospital consolidation. And so it goes.
That kind of environment doesn’t create more efficiency or innovation but undermines real competition just like you would expect one oligopoly facing off against another to do. We just end up with a few muscle bound players creating sizable barriers for new innovative and disruptive players to enter.
What is happening in the business of health care delivery scares me.
It sure looks like we are on the way to many fewer but much larger health care delivery corporations looking to check and balance each other and settle for their share of the spoils more than make this system work better.
It scares me, too. It’s like a movie where Godzilla takes on King Kong. Or the Alien battles the Predator.
But this is real life, and our health and household budgets might end up as collateral damage.
Related story by Bob Laszewski: Could Humana Grovel Any More To Get The Aetna-Humana Merger Approved By The Obama Administration?
Congress must be scared, as well. The US House of Representatives has scheduled hearings in September to discuss “concerns about reduced competition in the health care industry.”
Too little, too late?