Real or practically-exclusive buyer-based market power is known as monopsony. Where monopsony exists, the buyer essentially can control the marketplace. If this type of concentration of market power were to occur in Missouri’s commercial health insurance marketplace, it could materially harm hospitals and the patients they serve.
In a marathon session on Monday, state insurance regulators and representatives of the insurance company Aetna sparred about the influence the proposed Aetna–Humana merger would have on Missouri’s insurance marketplace. Most of it was a legal proceeding, using courtroom rules of evidence and procedure. This was followed by public testimony. The fundamental question at the hearing was whether Aetna’s purchase of Humana will allow the combined entity to gain sufficient market share to jeopardize the stability of the marketplace. We believe it would.
MHA submitted a letter to the hearing officer outlining concerns about market concentration. Eight other provider and consumer organizations — including Freeman Health System and Truman Medical Centers Inc. — submitted written testimony as well. Aetna came well prepared.
Although the Missouri hearing likely will have little direct effect on the Department of Justice merger review, insurers must be authorized to sell their product in Missouri. As a result, Aetna’s ability to sell policies in Missouri under a merged Aetna-Humana could be at stake.
Missouri’s insurance statutes require the Missouri Department of Insurance, Financial Institutions and Professional Registration to review mergers to analyze whether they would have a substantial influence on competition. In the analysis, DIFP must consider both the market concentration and the relative shares of the market held by the merging entities. The threshold for a highly-concentrated market is when the four largest insurers share at least 75 percent of the market.
Missouri’s commercial insurance marketplace meets the highly-concentrated standard. In Missouri, the top four insurers hold a market share in excess of 80 percent in 107 out of 114 counties, the City of St. Louis and in 24 of 28 metropolitan statistical areas.
In the Medicare Advantage marketplace, the concentration is more profound. The four largest insurers hold 100 percent of the market share in all but 16 counties, where the top four hold at least 92 percent.
Concentration in MA matters. In the last five years, more than 100,000 new enrollees have entered the MA market — a trend that is expected to increase as Baby Boomers generate a “silver tsunami” in health care demand. In MA, a merger would reduce plan choice and provider access, and affect premium rates and coverage options for hundreds of thousands of Missourians.
Hospitals need insurers, and insurers need hospitals. However, tipping the market power toward insurers could have a significant negative effect — the proposed merger would place hospitals at an extreme competitive disadvantage when negotiating contracts. Lower reimbursement while the uncompensated care load continues to increase jeopardizes hospitals and the entire delivery system.
The imbalance hurts consumers too. Consumers are unlikely to see savings. What they can expect is smaller provider networks, reduced patient choice and increased out-of-pocket costs. These consequences would have a disproportionately large impact on those that can least afford it — Missouri’s MA enrollees.
The state should send a strong signal to federal regulators that Missouri’s health care system, and Missourians in the commercial and MA sectors of the marketplace, can ill afford additional concentration in the health insurance marketplace.
Economists may call this type of concentration a monopsony. Whatever you call it, it’s unhealthy.
Send me a note to let me know what you’re thinking.
Herb B. Kuhn
MHA President and CEO
May 19, 2016
Congressional Committee Creates Hospital Legislation
MHD Posts Provider Spenddown Form Bulletin
DOL Finalizes Overtime Pay Rule
CMS Issues Change Request Regarding Reporting Of Drugs
MLN Connects Provider eNews Available
May 18, 2016
MHA Distributes Analysis Of Proposed Medicare Inpatient PPS For FFY 2017
HIDI Hosts Expanded Discharge Data Collection Webinar
Trajectories — Hospital Preparedness
CMS Makes Available IRF QRP Provider Training Resources
May 17, 2016
MHA Publishes Summary Of The 2016 State Legislative Session
EEOC Issues Final Rule On Wellness Programs
Christian Hospital Names New President
May 16, 2016
State Offers Provider Training For Presumptive Eligibility
CMS Issues New Survey And Certification Guideline
TJC Releases Standards Clarification
Opioid Epidemic: Making Progress
AHRQ Releases Opioid Disorder Management Draft Report
SAMHSA Kicks Off 5th Annual National Prevention Week