Will merging health insurance companies impact consumers?

In recent months, there has been a lot of talk about major mergers for some of the top health insurance providers in the U.S. As a consequence, some experts in the industry are beginning to wonder about what happens if those deals go through, because of the potential impact such mergers could have for the ways in which Americans are covered for their health care.

The five largest health insurance companies in the U.S. pull in tens of billions of dollars or more in revenue annually, and some may be looking to merge, contracting that top-five to a top-three, according to a report from the Wall Street Journal. However, there are concerns about what those deals might mean for the average American, because of what they would end up doing to competition.

Cause for concern?
For instance, if the mergers go through, there would be a huge increase in the number of counties across the country where at least 75 percent of everyone with a Medicare Advantage plan is handled by one insurance company, the report said. Further, two major mergers in particular would remove crucial competition in as many as 19 states nationwide for insurers that offer coverage through the federally mandated health insurance exchanges.

Martin Gaynor, a professor at Carnegie Mellon University and former Federal Trade Commission official, told the newspaper that it may often be a case of the smaller of the top-five companies in the field feeling as though they need to band together to be able to compete with the larger ones at the top of the industry, the report said. But what that means for consumers might end up being higher costs and fewer options for health care going forward.

Mergers of major health insurers could have a huge impact on Americans' bottom lines.

Historical precedent
However, depending upon which companies end up merging and what part of the country one examines, evidence suggests there might also be benefits to such deals, the report said. For instance, there are many parts of the country where one insurer already holds a huge amount of sway in the local market by controlling the plans for a large percentage of the people there. In those cases, a merger might be good.

But the question becomes whether those benefits would be enough to offset the potential damage done in other parts of the country, the report said. And on this note, experts are dubious – and have reason to be. Certainly, research on the industry as a whole has shown that as consumers get fewer options for coverage, their premiums tend to go up, and that's true of both individual and employer-sponsored group plans.

Proceedings in this area are clearly something that everyone in the health insurance industry (and potentially beyond) will want to monitor closely. Anything that happens between these giant companies is likely to create major shock waves for the rest of the sector moving forward, and would likely end up impacting the bottom lines and health care strategies of potentially millions of Americans.