As consumers, we know large volumes can drive costs down. It is how businesses like Home Depot, Lowes, Walmart, and other big-box retailers achieve such incredible growth by attracting consumers to their large stores. However, in the health insurance industry, volume does not always generate the same outcome. For the last twenty years, it has seen significant mergers and acquisitions of carriers, resulting in fewer choices for consumers. In some geographic areas, the industry consolidation has eliminated competition, leaving only one company to choose for your health insurance.
Meanwhile, to counterbalance network-based coverage and the ever-growing power of the health insurance industry, hospitals and physicians are actively pursuing the same playbook to proceed down the M&A path. Compared to twenty years ago, small medical clinics are part of mega-hospital systems, and sole practitioners are nearly extinct because supergroups have the resources and weight to negotiate lucrative network contracts. Consequently, personalized care has gone by the wayside, appointment wait times have grown significantly, and care and insurance costs are reaching unaffordable levels.
The process started long before most of us entered this world. In 1945, under President Roosevelt, Congress passed the McCarran-Ferguson Act, exempting insurance businesses under state regulations. The law was implemented to meet the needs of state insurance regulators who expressed concern that federal rules at the time might upset the extensive system of state regulation and taxation already in place. It opened the door for the insurance industry to grow and gain power unchecked outside the antitrust laws.
After decades, in the 1980s and 90s, network-based coverage evolved out of the federal Health Maintenance Organization (HMO) mandate. Healthcare providers suddenly faced financial challenges to their ever-growing incomes. Carriers began to require them to accept discounts to their fees by joining health insurance networks or face extinction. To counter, hospitals merged, and physicians formed supergroups to defend and negotiate better deals with the carriers. Even though hospitals and physicians were never exempt from antitrust laws, they have been allowed to merge and grow unchecked for years.
While the Affordable Care Act (ACA) enacted in 2010 regulates the insurance industry on how much profit they can obtain, it does not oversee the hospitals and physicians who have been charging increasing unregulated fees which are then reflected in higher premiums. Although ACA-regulated, the increasing premiums we pay to our insurance carriers are a direct byproduct of the unregulated fees charged by hospitals and physicians.
Today, healthcare providers continue to grow and strengthen, making it impossible in many cases for insurance carriers to negotiate network discounts. Consider the ongoing battle between UnitedHealthcare, one of the top three health insurance carriers, and the Montefiore Health System, one of the major hospital and physician organizations in New York. Each side seems to be blaming the other for "unreasonable" terms and conditions for Montefiore's hospitals and physicians to be considered as in-network providers for those who have United Healthcare as their insurer.
The consequence of this battle- patients with UnitedHealthcare insurance no longer have access to Montefiore as an in-network provider. The consolidations of the health insurance industry and healthcare providers are hurting the consumers with ever-increasing premiums and the loss of quality healthcare they deserve.
Some relief may be coming soon for the consumers. On July 9, 2021, the current Biden administration directed the Federal Trade Commission (FTC) and the Department of Justice (DOJ) to review and revise merger guidelines to prevent cost increase and decline in healthcare quality. Perhaps the antitrust regulations will finally be enforced on hospitals and physicians.