With insurance mega-mergers pending, the  existing competition may become even less.



This image is by The Commonwealth Fund.

A national study by The Commonwealth Fund found that in 97% of counties “there is little to no competition in Medicare Advantage insurance markets.” Competition in any market is good, because it pushes the companies to provide better services and prices than their competitors. However, when there are only a few companies, there are no forces pushing them to work for the consumer.

Here are some takeaways from the study:

  • Rural counties have the least amount of competition.
  • In urban counties, the competition is still lacking: 81 out of the 100 counties with the most Medicare beneficiaries were found to be noncompetitive markets.
  • Only one of those 100 counties, Riverside, CA, was classified as competitive.
  • The Medicare Advantage markets are cornered by six insurers. The three companies with the biggest reach are UnitedHealth (38 counties), BlueCross (13 counties) and Humana (12 counties). Together, they control nearly two-thirds of all counties.

The Medicare Advantage market is a small but significant portion of the program. About 30 percent of beneficiaries have Advantage plans, which is roughly 16 million seniors.

But UnitedHealth, BlueCross and Humana are big in more than one market. The Government Accountability Office recently found that those three insurance companies cover 80 percent of Medicare beneficiaries across all markets.

With the pending mergers between insurance giants Anthem and Cigna, and between Aetna and Humana, that we covered previously, the competition will certainly not improve.

The American Medical Association released results of a study focusing on the Anthem-Cigna and Aetna-Humana mergers, and what effect they would have on insurance markets. They studied markets without the impact of the mergers, and found:

  • Three-fourths of urban areas are already ‘highly concentrated” with low competition.
  • 41 percent of urban areas have one insurance company with over half the market share.

Ultimately, the American Medical Association found that the mergers would decrease already low levels of competition by enhancing companies’ market power, which means it will “encourage one or more firms to raise price, reduce output, diminish innovation or otherwise harm consumers as a result of diminished competitive constraints or incentives.”

Studying the effects of the merger, the AMA found:

  • The Anthem-Cigna merger would be anti-competitive in the combined markets of 14 states, including Virginia.
  • The merger between Anthem and Cigna would enhance market power in 85 metropolitan areas in 13 states, including Virginia. Overall, 14 states would see significant decreases in competition from the deal, according to the study.
  • The Aetna-Humana merger would increase market power in 15 metropolitan areas in 7 states, not including Virginia. In total, the study says the effects of the merger would be seen in 14 states, where competition would lessen sharply.
  • tom
  • Tom Says:
    “Prepare yourself-  this will be the outcome of the mergers for Medicare beneficiaries throughout the country and in Virginia particularly.
    This is also a preview of the Annual Enrollment Period, starting October 7, for those who want to change their Medicare Advantage or Medicare Part D plans.”

To read the study by The Commonwealth Fund, click here.

For more on the American Medical Association’s study, see this New York Times article.


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