Forgive Mike Mahorney for being a bit perplexed.

To him, it seems like only yesterday that he, like other benefits veterans nationwide, was scrambling to understand the complex Patient Protection and Affordable Care Act in the immediate wake of its passage, along with what it would mean for employers, employees and the future of benefits brokers.

“Everything I read from independent economists back then — even before the actual passage of the law — predicted it would result in massive consolidation at the provider level,” said Mahorney, who manages the group benefits unit of Nicoud Insurance Services, a Springfield, Ill.-based commercial agency that brokers fully- and self-insured benefits programs for small and midsized businesses in the Midwest.

Economists’ predictions have proven correct. Between 2010 and 2014, nearly 1,000 hospitals merged or were acquired, according to the American Hospital Association. More than 105 hospitals mergers occurred in 2012 alone, up from about 50 to 60 per year between 2005 and 2007, according to a January 2016 report in the “New England Journal of Medicine.”

By scaling up, hospital networks gain more negotiating muscle against the nation’s leading health care insurers.

Last year, the announcement of two infamous “mega-mergers” involving four leading health care insurers was seen as a direct consequence of massive provider consolidation, according to some analysts.

In July 2015, Aetna announced its plans to buy Humana for $37 billion. Weeks later, Anthem agreed to acquire Cigna for $54 billion. The deals immediately sparked a wave of commentary suggesting that, should the mergers go through, they would encourage further consolidation in a shrinking pool of insurers, leading to higher premiums due to a near or total monopoly.

The Obama Administration is suing to stop both mergers under U.S. antitrust law. If the Big Five insurance companies (the aforementioned four, along with United Health) do become the Big Three, the American people will suffer, said Attorney General Loretta Lynch at a July 21 press conference.

By putting most of the multi-trillion insurance industry in the hands of three “mammoth” insurance companies, Lynch and the Department of Justice contend that competitive pressure would disappear, forcing insurers to lower premiums while at the same time providing better care and benefits.

Would consolidation increase premiums for employers and employees?

In statements accompanying the deal announcement and court papers filed since the DOJ’s lawsuits, the four insurers reason that the mergers will create a new economy of scale, fostering administrative efficiencies that drive better value and higher-quality care, according to a statement announcing the Aetna/Humana merger.

Cigna’s CEO said its merger with Anthem will make affordable and personalized health care solutions more accessible to consumers.

Before the DOJ filed its papers, some employer groups expressed concern that the mergers would reduce competition and result in higher group premiums. In response, other economists have pointed to past mergers that successfully created efficiencies of scale for insurers but did not result in lowered premiums for employers and employees.

Paul Fronstin, director of the Health, Research and Education program for the Employee Benefits Research Institute, a nonprofit think thank that tracks employer benefit trends, hesitates to assume too much from past mergers.

“There are a lot of moving pieces as to how these deals would impact premiums,” said Fronstin, who has been analyzing employer-provided health benefits for more than 20 years at EBRI.

“We’re getting to the point where there are very few carriers,” he said. “What resulted from past consolidations, when the market moved from 20 insurers to 15, is one thing. Now we’re talking about moving from five to three, so this time it’s different, and that makes it much harder to predict what these mergers would mean for premiums.”

Fronstin, who has spent his career considering employers’ perspectives on their benefits offerings, doesn’t think that large, self-insured sponsors will be affected much by the mergers, if they go through.

Instead, smaller, fully insured employers might end up bearing the brunt of consolidation, he said.

“The carriers feel that they have to merge to compete and stay even with the wave of hospital consolidations,” noted Fronstin. “But there is a big question as to how much insurance companies can have over provider pricing — how much can they really drive down the cost of health care? Insurers have some negotiating power, but not necessarily as much as many people think.”

Driving consumer choice

There is one area of the insurance market where passage of PPACA has generated more carrier competition: the voluntary market.

It should come as no surprise to benefits brokers that the four major medical carriers involved in the proposed mergers have each significantly invested in voluntary lines since the passage of Obamacare.

Whether the mergers are ultimately allowed by courts or not — an investors’ note from ratings agency Moody’s recently speculated that the Aetna/Humana deal is more likely to succeed than the proposed Anthem/Cigna merger — Mahorney said the momentum behind consumer-driven group plans will continue to build. And that could only mean more growth in the voluntary market.

“It is the wave of the future,” said Mahorney, who believes that sponsors of all sizes still must struggle to maintain the cost of group benefits no matter how the mergers affect group premiums.

Carriers expect that, too, said Mahorney.

“Major medical carriers want to write these voluntary policies, and they know they are going to have to be competitive in the voluntary market to grow,” he said.

If voluntary lines were to be consolidated across the four carriers, it’s almost inconceivable what would happen — and it doesn’t help that the carriers involved are tight-lipped about the overall ramifications the proposed mergers could have on the rest of their portfolios, said Mahorney.

But the advantage of bundling voluntary and ancillary offerings with major medical plans is clearly one that all major medical carriers plan to leverage in the near term, whether there are five or three big national carriers.

For his part, Mahorney scratched his head and noted the irony of the entire situation: The Obama administration passed a landmark law that motivated health care providers to consolidate, and now it’s trying to block carrier consolidation – an outcome that some argue was all but guaranteed as a consequence of the law.

“I think what all brokers would really like to see is a clear definition of the competitive and regulatory landscape so we can continue to operate with some clarity, and continue to serve employers, who are going to need more help providing benefits going forward,” said Mahorney.

But, as he pointed out, brokers have proven to be adaptive creatures.

“Even without that clarity, we’ll continue to adjust to compete and serve,” said Mahorney, when asked how brokers can best handle this sea change.

“It’s what we’ve been doing for the past six years,” he added.

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