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AMA quantifies Cigna and Humana deal effects on market competition

By Allison Bell

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Physicians and health insurers came back from the Labor Day weekend ready to rumble over market concentration data.

See also: Insurers take on the hospitals

The American Medical Association (AMA) began selling a report showing how it thinks Anthem Inc. (NYSE:ANTM) could reshape the U.S. commercial health insurance market if Anthem succeeds at acquiring Cigna Corp. (NYSE:CI) without having to make any major divestitures of operations.

The AMA also began selling a report about how health insurance market concentration might change if Aetna Inc. (NYSE:AET) can complete a proposed acquisition of Humana Inc. (NYSE:HUM) without making major changes.

Antitrust regulators often describe market concentration using the Herfindahl-Hirschman Index (HHI) system. The most competitive markets have an HHI of 0, and the least competitive have an HHI of 10,000.

In the Anthem-Cigna report, the AMA says Indiana has such a concentrated commercial health insurance market that its HHI is already over 3,000. Letting Anthem complete the Cigna deal without major changes would push state HHIs over 4,000 in Indiana, New Hampshire and Maine, according to the AMA.

See also: 3 GAO discoveries about health insurer competition

The current version of the Anthem-Cigna deal could also leave Connecticut, Virginia, Kentucky, Georgia, Nevada, Colorado and Missouri with HHIs over 2,500, the AMA says.

In the report on the proposed Aetna-Humana deal, the AMA says Kentucky and Texas now have commercial health insurance market HHIs between 2,500 and 3,000. If regulators let Aetna complete the Humana deal as is, that would push the HHI in Kentucky over 3,000, and the HHI in Texas over 2,500, the AMA says.

Dr. Steven Stack, president of the AMA, put out a statement urging federal and state regulators to “use enforcement tools to preserve competition.”

“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,” Stack said.

See also: Kaiser: PPACA shuffles market share

America’s Health Insurance Plans (AHIP) fired back with a press release accusing the AMA of “recycling misleading data that does not accurately reflect the market today.”

The AMA comes up with much higher health insurance market concentration figures than the National Association of Insurance Commissioners (NAIC) does, in part because the AMA ignores major segments of the self-insured employer plan market, AHIP says.

AHIP also repeated earlier arguments that hospital consolidation has been one of the forces responsible for driving up U.S. health care costs in recent years.

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