Insurance Carriers & Providers consolidations concern law makers

September 22, 2015

Aetna plans to acquire Humana; Anthem wants to buy Cigna, and thousands of hospital groups are buying up smaller hospitals across the US. "2015 is on pace to notch the most U.S. hospital deals since 1999, with 71 announced through the end of August, according to Irving Levin Associates".

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Today, Executives from both Aetna and Anthem will testify at a Senate Subcommittee. Both carriers feel that consolidations will drive down the cost of health insurance. Hospital groups say the same thing. "Everybody is getting larger," said Michael J. Dowling, chief executive of New York's North Shore-Long Island Jewish Health System, which is changing its name to Northwell Health. "The big payers are going to be doing deals with big providers. The big providers are going to compete on quality and service and price. You have to be large enough to be able to compete in that world."

Smaller players like Ingalls Health System, with one hospital in Harvey, IL, are deciding they can't complete by themselves. Earlier this year, they began looking for a merger partner, partly out of concern that it might be cut out as insurers move toward smaller networks of health-care providers.

These health-sector deals are drawing increased concern from state and federal officials worried that the combinations damp competition and push up prices. The FTC has challenged several hospital acquisitions in recent years, but that doesn't seem to slow down the insurance carriers and providers from attempting mergers. I guess time will tell if this is better for consumers. A handful of big, supersized providers and insurance carriers doesn't sound like a good economic model for competition and lowering costs. The supply side of this equation is a tad lopsided, but then again, healthcare never really followed the traditional supply and demand model.