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In June, N. Adam Brown, MD, MBA, wrote about how our broken health insurance system prioritizes profits over patients. As part of our review of the past year's biggest events, Brown shares an update on the state of the industry in the context of the proposed (and abandoned) Cigna-Humana merger, and discusses what regulators should look out for in 2024 as other major mergers surface.

Twelve days. This year, it's not just a popular Christmas song. It's how long it took for the planned merger of Humana and Cigna to come and go. Talks of a potential coupling on November 29, but by December 10, Cigna it no longer planned to buy Humana.

Crisis averted. The merger of these two giant health insurers would have arguably been a huge lump of coal for patients and providers.

Even though many in the healthcare field can breathe a little easier now, the events of the last few weeks should prompt a deep discussion, particularly in Washington, D.C., about the implications of such a colossal consolidation -- because Cigna and Humana will not be the last payers to attempt to consolidate. Many payers are consolidating and controlling more parts of healthcare, and not just the insurance parts.

Why the Merger Was on the Table

Cigna's decision to try to buy Humana came after Cigna it would offload its Medicare Advantage (MA) business. It also came after Humana decided to from its commercial insurance business.

At first glance, the decisions seemed counterintuitive, especially for Cigna. MA has been highly lucrative for a number of companies. As the Kaiser Family Foundation , "in 2021, Medicare Advantage insurers reported gross margins averaging $1,730 per enrollee, at least double the margins reported by insurers in the individual/non-group market ($745), the fully insured group/employer market ($689), and the Medicaid managed care market ($768)." Cigna's MA business was similarly profitable, generating 4.4% of the company's $179.4 billion revenue in 2022.

But back in early November, when it became clear Cigna was leaving the MA market, Scott Fidel, a Stephens healthcare stock analyst, was on to what was likely happening. "We would see this action being one component of a potential pursuit of [Humana] as an acquisition target, with the divestiture being a proactive move to reduce antitrust risk," Fidel in a note to investors. If Cigna got out of MA and Humana left the commercial market, they "...would have no insurance overlap that would immediately trigger antitrust review," wrote Bob Herman of STAT News.

Crafty.

Both Cigna, a titan powered by its commercial business and boosted by its pharmacy benefit manager (PBM) Express Scripts, and Humana, which is its government-based business, have steadily expanded their influence in the healthcare market. The merger, at its core, appeared to be an attempt to create a more diversified managed care organization.

One that would not have been good for providers or patients.

Bad for Patients and Providers

If hospitals and other providers are consolidating market share, don't we need bigger, more powerful insurers to negotiate on behalf of consumers?

While Humana and Cigna -- and their powerful marketeers, industry-sponsored economists, and lobbyists -- would likely have tried to convince policymakers and the public otherwise, I don't believe the merger would necessarily have translated into improved patient benefits, outcomes, or expanded provider networks that would have enhanced patient access.

In fact, there is a lot of that concludes healthcare mergers of all types lead to increased premiums and worse outcomes for patients.

One from the Robert Wood Johnson Foundation found that after hospital and practice consolidation, the prices that hospitals charge for services rose between 3% and 56%. That paper also noted there are not "clear data showing that hospital and physician mergers are improving quality of care. In fact, for some procedures, like cardiac care, there is some evidence that patients fared better with more hospital competition."

And what happens when insurers merge?

A by the American Economic Association examined Aetna's 1999 acquisition of Prudential Health Care. It found:

• Aetna's actions in the 2 years immediately following the merger pushed some local health insurance markets toward a new equilibrium with higher premium growth rates
• The average health insurance customer was paying about $200 per year more by 2006 than if market concentration had remained at lower, 1998 levels
• The merger resulted in the substitution of nurses for physicians in highly affected markets

It is possible, even likely, that the Cigna-Humana merger would have resulted in similar outcomes.

What's more, a Cigna-Humana consolidation would have led to the unification of the two companies' PBMs. This system is already broken and in need of significant reform. According to , the resulting PBM would have controlled one-third of the market, about the same share CVS's Caremark enjoys. That outcome could have increased drug costs and reduced choices for consumers.

Washington Must Ready Itself for the Next Merger

While patients and providers have dodged one merger bullet, they are not safe for long. Another consolidation is surely on the horizon.

At a this past June, Senate Finance Committee Chair Ron Wyden (D-Ore.) said, "Advocates for proposed mergers often say they will bring lower health costs due to increased efficiency. Time after time, it's simply not proven to be the case. When hospitals merge, prices go up, not down. When insurers merge, premiums go up, not down. And quality of care is not any better with these higher costs."

Those who have read my previous article, "," should not be surprised. Wyden and his fellow lawmakers in Congress, the U.S. Department of Justice, and the Federal Trade Commission (FTC) need to take this reprieve and quickly put in place enhanced protections for healthcare consumers. Specifically:

• Congress needs to improve oversight of MA to ensure taxpayers and patients are protected
• The general public needs education to understand that insurance companies are not just insurance companies -- they are also large healthcare conglomerates controlling multiple parts of the healthcare value chain
• Lawmakers also need to strengthen the Affordable Care Act language surrounding the
• While the FTC has been appropriately focused on hospital mergers and private equity roll-ups that worsen patient pricing and choice, it needs to get serious about vertical and horizontal integration in the healthcare payer industry. To control prices, choice, and competition, the FTC must exercise .

In a December 7 , the FTC said, "Anticompetitive acquisitions and practices can chill fair competition, leading to higher healthcare costs, degraded working conditions, and less innovation across the healthcare and pharmaceutical industries."

The agency is working to strengthen its antitrust toolbox. But more is needed in the new year, especially from lawmakers on Capitol Hill.

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