The recently announced mergers of four of the nation’s largest health insurance companies threatens to decrease competition in multiple states and industry markets, a threat the American Medical Association says will exceed federal antitrust guidelines and warrants regulatory review.
The impact of the mergers, the association says, could lead to higher premiums for employers and individuals. Experts agree this means brokers would need to work with employer clients to find creative solutions to keep premium costs down.
In July, Aetna agreed to buy Humana, the second-largest provider of private Medicare insurance, for $37 billion in cash and stock as an effort to broaden its health care coverage. That same month, Anthem announced it will purchase Cigna for $48.4 billion.
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The combined impact of proposed mergers would exceed federal antitrust guidelines designed to preserve competition, according to new special analyses of commercial health insurance markets issued Sept. 8 by the American Medical Association. In all, the two mergers would diminish competition in up to 154 metropolitan areas within 23 states, the AMA says.
"A lack of competition in health insurer markets is not in the best interests of patients or physicians," said AMA President Steven J. Stack. "If a health insurer merger is likely to erode competition, employers and patients may be charged higher than competitive premiums, and physicians may be pressured to accept unfair terms that undermine their role as patient advocates and their ability to provide high-quality care.”
Creative solutions
Perry Braun, executive director of Benefit Advisors Network, agrees decreased competition could affect premiums, but adds several other factors also drive premium prices higher, including hospital industry consolidation, Medicare payment policies and protections afforded to prescription drug companies for the development of a new drug before a generic equivalent or a competing company can produce an alternative drug.
Regardless, if insurance premiums continue to rise, advisers will need to help employers tackle the costs.
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“Advisers should continue to perform the service that they provide their clients today and that is to understand the needs of the customers and work to satisfy the needs,” Braun says. “In some cases, creative solutions may be developed. I could envision larger organized hospital systems entering the insurance premium marketplace and competing for clients on an insurance premium basis and advisers may be the incubators of the idea, the executioners of the strategy in that local market.”
Insurance premiums have two key cost drivers that affect the premium: cost of services (or price) that the providers charge and the number of services (consumption) that a patient/employee consumes, says Braun.
“If [advisers] can continue to work on programs that reduce consumption through lifestyle and behavior change, as well providing tools that educate the consumer on all things health related (compliance versus non-compliance, price comparison tools) this reduction in the consumption patterns will have a positive impact on premiums,” he says.
Wendy Keneipp, a partner and coach at Q4intelligence, says, “Brokers and employers need to get creative together as trends are moving quickly in redefining what ‘benefits’ mean to different groups.”
She believes benefits are increasingly going to become customized based on the makeup of the employee group, ranging from a minimalistic approach to a completely hands-on, long-term strategy and guidance approach.
“Employers are shifting as much as the carriers and brokers themselves in what they want and need. Brokers need to get clear on what their specialized value proposition is and work with a singular focus to attract the particular type of employer who benefits most from that specialty,” she says. “One size is no longer fitting all.”
Broker model
Decreased carrier competition also means less opportunity for agency spreadsheet competition, Keneipp says.
“If an agency hasn’t already moved away from quoting as a means to earning new clients, they’re going to be forced there,” she says. “With fewer options available, it leaves brokers with no choice but to compete on their value and earn the business by being the best agency to represent the client and guide them in their decision-making. Too many brokers believe clients choose them to help secure and place the insurance product, when in fact, the client is, or should be, choosing them to help make strategic decisions about their overall benefits program, which includes selecting the right carrier and the right products.”
