Breaking the merger wave: Time for the government to keep insurer consolidations in check

Federal regulators must examine big plan coalitions such as Anthem-WellPoint.

Editorial. Dec. 1, 2003.

One of the big problems with managed care, as physicians see it, has been the incredible market power that health plans have garnered. As an AMA study showed earlier this year, in most metropolitan areas, one or two plans have a market stranglehold, essentially forcing physicians into a take-it-or-leave-it position when it comes to contract negotiations. Could things get any worse?

As it turns out, they can.

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Earlier about Anthem
Earlier about WellPoint

It's bad enough that the two largest controllers of Blue Cross Blue Shield plans, Anthem and WellPoint Health Services, announced on Oct. 27 a $16.4 billion merger to create the nation's largest health plan. On the same day, UnitedHealth Group -- itself the No. 1 plan until the Anthem-WellPoint merger is closed -- spent more than $1 billion to buy Mid Atlantic Medical Services Inc. in Maryland.

Yet what's even more unsettling is that the mammoth new WellPoint Inc. already is on record as saying they will hunt for more acquisitions. What companies they are, no one knows, but it's clear to financial analysts that managed care companies are entering a new wave of consolidation.

Not only would there be local domination, but also the possibility becomes more real for a few plans to gobble up competition and extend their dominance nationally, through big contracts with multistate employers.

That's why the AMA is again urging federal regulators, as President Donald Palmisano, MD, says, to "seriously examine" health care industry consolidations, which are creating a market marching "toward domination by a few Goliaths."

Already, according to the AMA, more than half of all commercially insured Americans are in the 10 largest health plans. Having those patients fall into even fewer firms is a scenario that would crimp even more the minuscule negotiating leverage physicians may have in contract talks.

The trend also has the potential to threaten patients' well-being. As Dr. Palmisano told AMNews, a larger health plan would have even greater weight to throw around when it came to key issues such as defining medical necessity and creating drug formularies.

And the Anthem-WellPoint and United-MAMSI deals come as insurance premiums continue to rise, adding to the number of uninsured. Some financial analysts have said a motivating factor in these mergers is the plans' desire to keep up their profit margins, which are being threatened because large payers are getting tired of paying annual 15% to 20% premium increases.

There appears to be some activity, other than from the AMA and other medical societies, in pushing federal regulators into examining the trend of ever-growing health plans. On Nov. 6, Rep. Pete Stark (D, Calif.), the senior Democrat on the Ways and Means Health Subcommittee, joined three fellow Ways and Means Democrats in issuing a letter to the Federal Trade Commission seeking an investigation into the Anthem-WellPoint merger.

Unfortunately, the FTC has done little in the past to look into health plan consolidation, and insurance industry analysts are not expecting the agency to put up any roadblocks to the Anthem-WellPoint and United-MAMSI deals.

But the time is now for the FTC to look into the consolidations of health plan. It's not just about the nation's business; it's about the nation's health.