Providers fear insurance mergers will intensify rate pressures

Dr. Robert Wergin practices family medicine in Milford, Neb., population 2,000. His office interacts with many different health insurers. But three carriers—Blue Cross and Blue Shield of Nebraska, Aetna subsidiary Coventry Health Care and UnitedHealthcare—are the dominant private payers in his area. That number could shrink even more.

The health insurance industry is on the verge of large-scale consolidation as its leaders seek to drive down costs, increase negotiating leverage and boost profits. Anthem has gone public with its takeover offer for Cigna Corp., valuing the deal at $54 billion. Aetna is reportedly on the brink of acquiring Humana, while UnitedHealth Group is considering a complex buyout of Aetna. In addition, Wall Street views the smaller publicly traded insurers, such as Centene Corp., Molina Healthcare and WellCare Health Plans, as ripe targets for a second round of dealmaking.

Insurance consolidation could, in turn, spur more consolidation among providers to counter the greater bargaining power of a smaller number of big insurers. And independent providers are wary about that. “If providers merge, then insurers have to merge, and if insurers merge, then providers have to merge,” said Erik Gordon, a business professor at the University of Michigan. “It's a cyclical arms race, until antitrust steps in and says that's enough.”

The merger tremors worry Wergin, president of the American Academy of Family Physicians. Consumers' choice of health plans would shrink, and insurers' cost savings would not guarantee lower premiums for employers and consumers or broader provider networks, he said. 

The AAFP wrote a letter this month to the Federal Trade Commission warning that letting health insurers morph into leviathans would result in “increased leverage and unfair power over negotiating rates with hospitals and physicians.” Deals would especially affect smaller physician practice groups like Wergin's.