Missouri's Block of Aetna-Humana Merger is Good for Consumers

June 2, 2016

Authors: Herb B. Kuhn, MHA President and CEO, and Jane Drummond, MHA General Counsel and Vice President of Legal Affairs

Missouri’s Department of Insurance has announced that it would block the merged Aetna and Humana from selling key lines of health insurance in the state because the combined organization would wield excessive market power. It was an important decision for providers and consumers.

Although the state’s action to bar a merged Aetna from markets in Missouri doesn’t materially affect the Department of Justice review, it was an important signal to the insurer and other states that are reviewing the potential merger’s influence.

In reviewing the merger, the Missouri Department of Insurance convened a hearing on May 16 to consider both the market concentration and the relative shares of the market held by the merging entities. The threshold for defining a highly-concentrated market is when the four largest insurers share at least 75 percent of the market. The Missouri Hospital Association, and several other provider and consumer groups, submitted testimony about the state’s high level of existing market concentration.

In Missouri’s commercial insurance marketplace, 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. The level of concentration in the Medicare Advantage marketplace is greater. In MA, the four largest insurers hold 100 percent of the market in all but 16 counties. In these counties, the top four hold at least 92 percent.

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.

The merger could create a tipping point in market power, with hospitals and other providers at an extreme competitive disadvantage. Lower commercial and MA reimbursement, coupled with growing uncompensated care, would jeopardize hospitals and the entire health care delivery system.

For consumers, savings aren’t guaranteed. What consumers can expect is smaller provider networks, reduced patient choice and increased out-of-pocket costs. And, these consequences will affect Missouri’s MA enrollees disproportionately.

Missouri regulators worked swiftly and transparently in the interest of the state’s providers and consumers. We appreciate their work. Hopefully Missouri’s actions will empower other states’ regulators to fully review the impact of the proposal, and, where concentration is profound, protect their providers and consumers similarly.