The Hartford Courant Dan Haar column
It's an old story with a new Obamacare twist. But the key question remains the same. Who will benefit from all this supposed exorcism of waste? Spoiler alert: It isn't you and me, at least not as health care consumers.
The logic works like this: Obamacare is prodding the nation's five already giant health insurers into megamergers by promising to reward patient management of large populations as we move away from the old fee-for-service model that rewards more medical care rather than preventive health.
It might seem as though 14 million customers, representing more than 20 million covered people, makes
Federal regulators, seeing this, will summarily approve the megamergers in the latest round, or so the logic goes. After all, it's federal action -- punctuated by Thursday's
There might be some logic to all that. Big companies have always said they need to scale up in order to deliver benefits of efficiency.
But even if this wave of mergers is good for the companies involved -- a hotly debated question -- the main winners are likely to be shareholders, top managers and
So, will merging the largest health insurers -- or management companies, as they now call themselves -- from five down to three, or even two, succeed in removing cost and waste in the system?
That's hard to know, because big bureaucracies always have their own weight to carry. Anthem is promising an additional
But let's say the claims are on target and the mergers make the combined companies more efficient. Will prices for consumers fall, and will health outcomes improve as a result?
History has a clear answer to that question.
"Research has not been too friendly to these mergers," said Leemore Dafny, a professor at the
The problem is that the merger talks pit insurer against insurer dividing up the benefits, with hospitals, medical professionals and customers not represented. The only hope for consumers is that the
Doing the right thing does not necessarily mean regulators must reject these mergers outright. And it doesn't only mean they must order divestitures of a few business units that would make the combined companies anti-competitive.
Dafny and others have a better way to approach mergers. Simply put, the combining companies should be required to show in advance how the mergers would create broad social benefits, and how those benefits would be measured.
Why not impose this added burden? For all you libertarians out there who believe this would mark a dangerous incursion by government, remember: More than half of health care is paid by taxpayers. If a couple of insurers want to marry up with less oversight, fine. They just wouldn't get any
In a
"However, the absence of detail on these items should arouse concern about whether the goal of a given merger is truly to better serve the community," they wrote.
The companies certainly go into detail about measurable benefits for shareholders, and buried in their bylaws are the tens of millions that their CEOs would gain in a "change in control."
The article by Dafny and Lee was about mergers among hospitals and other health care providers, but Dafny said the same principles can apply to mergers of insurers. In a way, more is at stake because there are far fewer insurers left.
The beauty of imposing higher regulatory barriers on health insurance mergers is that these companies don't need any immediate help from each other. They're doing fine, thank you, as a result of Obamacare's universal health insurance mandate, internal cost-cutting and more aggressive management of patient care -- not just denial of services like in the bad old 1990s, but also some pretty good preventive health programs.
Aetna under
For
Notably, the companies seeking to make acquisitions are also seeing their stock prices rise, which doesn't typically happen.
But history shows they'd do so on the backs of thousands of sacked employees -- many of them in
Cordani, whose golden parachute is reported by the Bloomberg news service to be
So why the merger?
Dafny, the Kellogg professor, was previously an economist at the
"There's a lot that insurers could do to try to create value," Dafny said. "Have they given it a try?"
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