Worries About Industry Consolidation Remain After Health Insurance Giants Scrap Plans to Merge 

By Consumers for Quality Care, on December 20, 2023

Worries About Industry Consolidation Remain After Health Insurance Giants Scrap Plans to Merge 

Although a planned merger between Cigna and Humana seems to have fallen apart, according to The Wall Street Journal, increased consolidation in the health care industry, according to Axios.  

Critics of industry consolidation argue that mergers increase costs and decrease consumer options while not necessarily improving care. These concerns were raised again late last month, when it was reported that health-insurance giants Cigna and Humana were in talks to merge. The biggest concern was that such a merger would have created a pharmacy benefit manager (PBM) with control over one-third of the market. Already, Express Scripts, owned by Cigna, is one of the three major PBMs that together account for nearly 80 percent of all prescription drug claims. 

PBMs have come under bipartisan scrutiny of late, with policymakers alleging that PBMs use deceptive business practices to inflate drug prices for consumers. In a similar Axios article reporting on the possible Cigna and Humana merger, the Managing Director and Senior Equity Research Analyst at TD Cowen, Gary Taylor, speculated that the PBM aspect of this proposal would have been challenged by both Congress and the Biden administration.   

Leemore Dafny, a former Deputy Director for Healthcare and Antitrust in the Bureau of Economics at the Federal Trade Commission, acknowledged that these mergers have the potential to decrease competition, forcing smaller health care entities to either seek a buyout or shut down their businesses altogether. “As the set of names under each corporate masthead grows, there are fewer opportunities for unintegrated entities to win business and therefore a greater chance they seek acquirers or exit the market entirely,” said Dafny.  

Likewise, Zack Cooper, an Associate Professor at Yale University, agrees that with a decrease in competition, large health care systems have fewer incentives to lower prices for consumers. “Broadly, when firms gain market power, it softens the pressure on them to compete, it allows them to have higher markups and more profits,” said Cooper. 

For this reason, the Biden administration has aggressively combatted consolidation in the industry and even successfully blocked some large-scale heath mergers. 

Decreased competition hurts consumers, often leading to fewer options for care and higher out-of-pocket costs. CQC urges regulators and lawmakers to scrutinize these mergers and to ensure that consumers don’t foot the bill for anti-competitive practices.