A Large Court Battle Looming
This week news broke that the Department of Justice is suing to block massive consolidation in the insurance industry through mega-mergers due to antitrust concerns. This case will have a major impact on the pocketbooks of many Americans as rising healthcare premiums continue to cripple businesses and individuals.
Over the past five years, since the passage of the Affordable Care Act, there has been a reduction in choice for many healthcare consumers. Since the law has many health insurance market reforms, this has caused many organizations to either merge for better bargaining power with healthcare providers or leave the marketplace all together.
Since last summer when two announcements were made federal officials have been determining how to handle this very interesting scenario. The two deals in place include a $54 billion merger between Anthem and Cigna as well as a $37 billion deal between Aetna and Humana.
On our weekly radio program America’s Healthcare Challenge, we covered this closely as it would transform the insurance marketplace by consolidating five companies down to three. What is contained in the decision will have major impacts on the future of insurance choice.
The insurance companies argue that these deals are good for the consumer because it allows them more juice with healthcare providers, but the problem is premiums continue to rise for nearly everyone. How the Insurance companies plan to respond depends on the decision, but some believe they will continue in this direction through strategic partnerships if antitrust officials are successful in their litigation.
These decisions are important for the ACA Marketplace for several reasons. The first is financial. One of the favorite analogies that policy wonks like is comparing the healthcare system to the airline industry. As a general rule of thumb, less choice equates to higher prices. Less choice could also lead to lower quality as well.
The ACA is one of the first laws in American history that essentially tells an entire industry how much money they can make. This is through the Medical Loss Ratio (MLR) that that mandates that at least 80% of their premiums must go to claims. This limits the amount of money they can make for their shareholders so the incentives are not there for them to lower premiums.
Finally, an interesting point is the timing of these actions prior to open-enrollment and also in an election year. It is also on the heels of the President’s scholarly article written in defense of the Affordable Care Act. It would appear that they are doing everything they can to preserve the structure of the Affordable Care Act and improve upon it.
Nearly everyone that I visit with in the industry agrees that 2017 is going to be a painful year for many as premiums are looking to skyrocket and many will experience sticker shock. This is why we produce the program because we want you to be informed as you make these difficult decisions.
For my commentary on this issue make sure to listen to America’s Healthcare Challenge this week as we will be spending nearly the whole program discussing this issue and its impact on you. If this information interests you and you are involved with a group of people who would like to learn more, contact the Mid America’s Speakers Bureau and ask about me coming to your city.
As we roll into a volatile 2017, make sure that your organization has the right strategies in place to manage not only rising healthcare costs, but also difficult compliance requirements. Less choice in the fully-insured marketplace can lead to other opportunities through self-funding. Contact E.D. Bellis for a preliminary and find find out how we can help you.