WASHINGTON – A new wave of insurance
mega-mergers is fueling fears that ObamaCare is crushing competition.
Despite initial claims that the law would bring down costs, Republican
critics and others say it's driving the industry to consolidate -- which
could end up costing consumers more.
"Without question, the enactment of ObamaCare has prompted increased
consolidation in the health care industry," House Judiciary Committee
Chairman Rep. Bob Goodlatte, R-Va., said in a statement Thursday,
announcing hearings on health care industry competition.
The concern, growing rapidly, is there may only be a few powerful
operators still standing while smaller players are driven out of
business. The billion-dollar deals accelerated following the Supreme
Court's ruling that kept Affordable Care Act subsidies in place.
Whether that's coincidence remains to be seen. But conservatives
worry the health law, which requires companies to insure virtually
anyone, puts pressure on firms to join forces. To survive, insurers must
spread fixed costs over more customers. The bigger they are, the easier
it will be to meet ObamaCare-imposed caps on operating costs and boost
profits.
The insurance giants claim the mergers will let them operate more
efficiently, but others see the potential for rising premiums.
"[ObamaCare] eliminates many of the essential competitive checks
remaining in the American health care system," Christopher Pope,
a scholar at The Heritage Foundation,
wrote. "Because the law relies so heavily on unfunded regulatory
mandates to finance the benefit structure, it is obliged to strengthen
the power of incumbent providers to prevent targeted competition from
eliminating their profit centers."
The latest announcement came Friday when Anthem Inc. announced it
agreed to acquire rival Cigna Corp. for $48.4 billion. If approved, the
new insurance giant would have an estimated revenue north of $115
billion and serve the health needs of more than 53 million people.
The Anthem-Cigna news comes on the heels of another mega-merger
announced earlier this month, when Aetna Inc. agreed to buy Humana for
$37 billion.
If both mergers go through, only three major players in the U.S.
insurance industry would be left competing for customers: Anthem, Aetna
and UnitedHealth.
Senate Majority Leader Mitch McConnell, R-Ky., earlier this month
pointed the finger at ObamaCare for the developments. Goodlatte's
hearings, meanwhile, will explore the role ObamaCare has had in shaping
consolidations and the consequences American consumers may face.
"A concern that I have raised time and again is that, in the health
care marketplace, the will of the market is being displaced by the
judgment of the federal government," Goodlatte said. "That fear was
realized when ObamaCare was enacted into law and we are seeing its
tangible effects today."
Democrats, though, argue that insurers have been merging since long
before the Affordable Care Act. Reps. John Conyers, Jr., D-Mich., and
Hank Johnson, D-Ga., said in a statement that the law, "in combination
with vigorous antitrust enforcement, can assist in alleviating some of
the problems that are the result of decades of too little competition by
instead fostering competition with existing insurers and allowing for
new and innovative players to enter the market."
And Edmund Haislmaier, another Heritage scholar, says the companies
likely have been looking to trim costs and boost profits since before
ObamaCare.
President Obama's health care overhaul was designed to generate more
business for insurers because most Americans were required to have
health coverage. However, the law also put pressure on industry profits
with various mandates.
A recent analysis in
The Economist
suggested size does matter when it comes to insurance companies. "Scale
will be needed to win the best deals from a hospital sector that has
already raised its bargaining power through mergers," the report
said. "The insurers with the most customers will be able to negotiate
the best deals with the providers of care. Big insurers may also be able
to negotiate better deals for drugs."
Dr. Scott Gottlieb, a resident fellow at American Enterprise
Institute, told CNBC it is only a matter of time before participants
feel the pinch. "Health insurance costs [to consumers] haven't gone up
because the plans are being hollowed out," he said, arguing people are
getting less coverage than they used to.
"Eventually, the rising costs because of the monopolization of the
hospitals is going to catch up," Gottlieb, who served as an adviser at
the Centers for Medicare and Medicaid Services in 2004, said.
Assistant Attorney General Bill Baer, who heads up the Justice
Department's antitrust division, told Bloomberg TV that he would assess
the industry as a whole and given the surge of deals, would make sure
competition is preserved.