Report: Divestitures in Aetna-Humana merger won't help Medicare Advantage competition

Divestitures made during a previous healthcare insurance merger did little to maintain competition among Medicare Advantage (MA) plans, reaffirming concerns that the Aetna-Humana merger will increase premiums for seniors and lead to higher costs within the Medicare program, according to a new report from the Center for American Progress (CAP).

Echoing previous arguments that a merger between the two health insurance giants would limit market competition for MA beneficiaries, CAP reviewed a 2012 merger between Humana and Arcadian Management Services Inc., in which the Department of Justice required divestitures in 15 MA plans. The acquiring companies--Cigna, Vantage Health Plan Inc. and WellCare Health Plans Inc.--exited more than half of the 51 counties by 2015, and only two of the 15 divested plans are currently offered. As a result, premiums increased an average of 44 percent in nearly half of the divested plans, according to CAP.

The left-leaning public policy organization noted that any competition from the divestitures was short-lived since the canceled plans were offered for just 1.5 years on average. Of the three buyers, only Vantage Health Plan still appears to be a viable competitor. WellCare's membership in two Arizona counties declined rapidly over the course of two years, leading to the insurer's exit in 2015. Meanwhile, Humana plans saw a 35 percent increase in membership.

"The Medicare Advantage market is already highly concentrated, and the large number of overlapping markets in the proposed Aetna-Humana merger threatens to increase this consolidation even further," the report stated. "Divestitures will be insufficient to protect Medicare Advantage beneficiaries, taxpayers and the Medicare program."

Previous reports have raised concerns about how major consolidation within the health insurance industry would impact MA markets that already face limited competition. The American Hospital Association has also expressed concerns about the potential mergers, arguing that the Aetna-Humana deal would exacerbate the limited competition within MA plans. Others have countered that divestitures following an Aetna-Humana merger would leave the MA market "ripe for disruption" by smaller plans.

To learn more:
- here's the CAP report