Survey respondents are under no illusion that consumers will benefit. Only 10% believe payer consolidation will result in lower consumer healthcare costs, and even fewer (8%) believe patients will receive a higher quality of care.
Senior-level healthcare industry stakeholders believe that consolidation in the payer space is likely to continue over the next ten years—and not to the benefit of consumers.
According to a recent survey conducted by Salt Lake City-based healthcare consulting firm Leavitt Partners, 60% of respondents say payer consolidation will increase even though the Department of Justice already considers most markets to be moderately or highly concentrated.
Survey respondents are mainly C-suite executives from healthcare provider organizations, payers, pharmaceutical and medical device companies, and academic settings.
Impact on Consumers Expected to Be Negative
While healthcare industry insiders agree that consolidation among insurers will continue over the next decade, they also indicate that this trend is unlikely to be good for consumers.
When asked what they expect to be the most likely consumer benefit, 49% of respondents said there will be little benefit at all. Additionally, 79% believe that consolidated payer markets generally will not result in lower product prices and 74% believe it will not generally be good for consumers.
"There is a recognition that consolidation is occurring as a byproduct of the Affordable Care Act, and we see that it is encouraging value in certain ways. It could be value as a benefit of better care coordination, a better understanding of where patients are and how to follow up with them… But when you get into the nuts and bolts of more value for the consumer, respondents are skeptical," says Douglas Hervey, a director at Leavitt Partners.
"The concern, I think, is that respondents believe [health plan] prices will go up. They don't necessarily believe that healthcare executives from Aetna, Cigna, and Humana would actually drop pricing… There is some question as to whether any money will be distributed back to the consumer."
Not only do survey respondents find it doubtful that consumers will receive a price break as a result of consolidation, 63% of respondents see higher priced health plans as the biggest consumer risk.
On a more positive note, 63% of respondents indicate that payer consolidation will generally lead to more accountable care. Hervey says industry experts may believe that as insurers become bigger, they will be better able to use data to control costs and influence providers to create better care delivery models.
"About two-thirds of respondents suggested consolidation will facilitate accountable care. Perhaps that is due to a better ability to aggregate lives, to have a better visibility of patient profiles, and a better opportunity to engage in more outreach and to streamline services," he says.
Despite the anticipated increase in accountable care, however, survey respondents do not expect that to translate into more affordable or better care for consumers. Only 10% say payer consolidation will result in lower consumer healthcare costs, while even fewer (8%) believe patients will receive a higher quality of care.
Several Factors Are Driving Consolidation Trend
There are several factors driving payer consolidation. Chief among them, according to survey respondents, is that consolidation can enhance negotiating leverage (45%) and reduce administrative costs (20%).
In addition, Hervey says, insurance companies are looking to broaden their portfolios and diversify risk.
"Plans are recognizing that by expanding their portfolio in the Medicare, Medicaid, and public exchange markets, they can gain diversification," he says.
Payers can also find more strength in numbers through consolidation. For example, Hervey says, Aetna has 1.25 million covered lives in its Medicare Advantage plans, while Humana has 3.2 million. If the merger of the two insurance giants is allowed to go through, they will usurp UnitedHealth as the leader in this market.
"By joining forces, Aetna and Humana can displace UnitedHealth, which currently has most lives," Hervey says. "The writing is on the wall that commercial plan growth isn't expected to be high, and I think a lot of plans are looking to find growth avenues. Medicare Advantage plans and other government plans are a good opportunity."
Hospital-Owned Plans Increase Consumer Choice
While the mergers of large insurance companies—such as Anthem and Cigna and Aetna and Humana—are typically expected by survey respondents to have a negative impact on competition and consumers overall, there may be a bright spot on the horizon.
As many hospitals and health systems jump into the fray with their own health plans, they are bringing more choice to consumers who might otherwise have very limited options, depending on their market.
The question that remains to be answered, Hervey says, is whether or not hospital-owned plans can create enough value to be sustainable in the long run.
"I think the entities that will be successful are the ones that figure out how to drive value, that have the characteristics and competencies necessary to do that," he says, adding that these plans have a lot going for them from the outset.
"Providers generally have strong brand recognition and trust. They have the ability to control patient and physician behavior, and they have the capital to take on risk."
Another core competency, Hervey says, is that provider-owned plans must have the ability to manage the risk once they own it.
"Can these providers really manage risk? That has been very difficult for businesses to do. There is a reason why a lot of payers' products have not been successful and why we have seen the failure of many CO-OP plans," he says.
"But, I know there are a lot of advocates that believe by aligning goals within a health system, a provider-sponsored plan can shift an organization to one that has a desire to keep people healthy and provide value."
Rene Letourneau is a contributing writer at HealthLeaders Media.