AMA Warns Insurance Mergers Would Further Concentrate Markets

Most U.S. insurance markets are controlled by just a few companies, according to a study by the American Medical Association, the New York Times reports.

Those markets likely would become more concentrated if Anthem's plan to acquire Cigna and Aetna's proposal to buy Humana are approved, according to the study.

AMA Study Findings

AMA has been systematically analyzing competition in insurance markets for 15 years, according to the Times. In its latest study, it found that among the insurance markets in 388 metropolitan areas, 70% were highly concentrated.

The study found that the states with the least-competitive markets are:

• Alabama;
• Alaska;
• Delaware;
• Hawaii;
• Illinois;
• Louisiana;
• Michigan;
• Nebraska;
• North Dakota; and
• South Carolina.

The study also found that the proposed mergers could reduce competition in as many as 154 metropolitan areas in 23 states.

In the study, AMA cited federal antitrust guidelines that state, "Mergers should not be permitted to create, enhance or entrench market power." The guidelines note that "a merger enhances market power if it is likely to encourage one or more firms to raise price, reduce output, diminish innovation or otherwise harm customers as a result of diminished competitive constraints."

Comments, Next Steps

AMA President Steven Stack said the Obama administration should closely review the proposals because "a lack of competition in health insurer markets is not in the best interests of patients or physicians" (Pear, New York Times, 9/8).

Federal regulators must approve plans for Anthem's $48 billion acquisition of Cigna, as well as Aetna's $35 billion acquisition of Humana. Antitrust experts say the Department of Justice and state attorneys general are likely to closely scrutinize such proposals (California Healthline, 7/24).

U.S. hospitals also have raised concern about such mergers. In a recent letter to DOJ, the American Hospital Association said the Anthem-Cigna deal could cause "potential harm to consumers" from a "large and durable" reduction in competition (California Healthline, 8/10).