will-carrier-consolidation-drive-prices-up-or-down_The Justice Department is questioning the merger of Aetna and Humana, and CIGNA and Anthem, citing that too much merging of insurers will create a monopoly like industry which will ultimately result in higher consumer prices.  Kaiser Health News’ recent post outlines the contrarian opinion that the monopsonistic forces, that mega retailers such as Walmart use, will leverage and force prices down for consumers if carriers are able to consolidate.

We have watched as the healthcare delivery system has consolidated with hospitals combining with physicians practices, to build regionally dominant healthcare providers.   These regional monopolies have all but stripped away the carrier negotiation leverage.  Instead of monopsonistic market leverage, healthcare systems struggle to gain efficiencies that would curb their need for 15-20% charge master increases.  We’re also seeing consolidation of generic drug manufacturers drive the cost of generic drugs upward.  Finally, pharmacy management companies have consolidated resulting in continued hyperinflation of prescription drugs.  So will allowing carriers to also consolidate tip the balance in favor of consumer pricings?  Or will ultimately the result of two monopoly-like entities negotiating be simply a stalemate – mutually beneficial profitability leaving employers ultimately paying inflated pricing regardless.

All of this discussion of price negotiations masks some of the more compelling issues of waste in our healthcare delivery system.  Most experts agree that there is 25-30% waste in the healthcare system stemming from redundant testing, inadequate and nonintegrated health records, conflicting medications and lack of overall care management. Employees struggle to gain accurate diagnosis, avoid medication conflicts, wrangle numerous specialist and understand the payer system complex billing systems.

Employers who successfully manage waste out of their programs through stronger primary case management and navigating stronger care platforms for their employees will fare better regardless of who owns the delivery system or the carrier.

Joanne Forbes

Joanne Forbes

Principal, Health & Welfare Consultant - Joanne works with clients to analyze their benefit plan and then design a plan of action to support their objectives for recruiting and retaining employees. Joanne is a well-respected veteran with over 20 years of experience in the fields of employee benefits, business development and business consulting.