For more information, email us at info@girsinc.com or call us at 901-834-9119.
GIRS tracks payer market mergers and other trends to assist our clients to obtain coverage and payment both during and after the process. The American Medical Association (AMA) found out that payer market mergers have been common across all markets and growing. Payer market consolidation has been growing over the past five years and this consolidation is having undesirable effects on consumers, the American Medical Association (AMA) stated in its latest study and analysis of payer market mergers. In its prior studies on payer market awareness, AMA found reason for concerns with the increased merging amongst payers.
The analysis focused on the following questions:
- Are health insurance markets competitive, or do health insurers exercise market power?
- Are proposed mergers between insurers likely to maintain, enhance or create such power?
Research disclosed that many health insurance markets in the United States are extremely concentrated and much more concentrated than they were six years ago. This could have a negative impact on #medtech payer coverage if a non-coverage policy is implemented after the merger. Evidence of their monopolistic behavior strongly suggested that health insurers are implementing market power in many parts of the country and, in turn, initiating competitive harm to consumers and providers of care. The study assessed market concentration for 384 urban statistical areas from across the nation through the Herfindahl-Hirschman Indices (HHI) as well as the commercial market shares of the two largest payers.
Georgia, Connecticut, Colorado, Virginia, and New Hampshire are likely to experience the greatest increase in commercial insurance concentration. Each of these markets is self-assured to increase 30 percent or more in commercial insurance concentration due to the combined market footprint the mergers create. Each of those state markets currently has an HHI above .15.
The HHI score aligns the market share for each competing firm in the market and then adds those together. The more competitors of equivalent market share that exist in a market, the smaller the HHI score will be; thus, a smaller score is associated with stronger competition.
The Department of Justice (DOJ) and the Federal Trade Commission (FTC) considers a market with an HHI score over 2,500 being the standard for high concentration.
Almost 75 percent of the combined health maintenance organization (HMO), preferred provider organization (PPO), point of service (POS), and exchange markets were exceedingly concentrated, with average scores well above the levels identified as high concentration. Separated by different markets, most HMOs—which are particularly favored by consumers in Medicare Advantage were highly concentrated. All but four percent fell above the HHI benchmark. The POS market exceeded all markets with 100 percent concentration. Amongst PPOs, 86 percent of the markets were highly concentrated, and 99 percent of the exchanges were highly concentrated.
Overall, the average market’s HHI score rose 151 points in the last five years. Roughly, seventy percent of markets were highly concentrated in 2014, but rose to 74 percent of market shares that were highly concentrated in the last four years. For many markets, these increases represented large surges into greater concentration. Those that saw an increase during this timeframe had on average a 481-point increase. Less than twenty-five percent experienced an increase at or above 500 points. A little under of half of the markets had their HHI increase by a minimum of 100 points.
Some of the markets that experienced this increase in concentration had not merged before the study timeframe. HHI scores were increased by forty percent but they did not hit or exceed the 2,500-benchmark score. However, a quarter that were considered relatively low or moderate concentration previously underwent adequate consolidation that their HHI exceeded the benchmark.
Before 2014, many markets were already highly concentrated. Over half of these markets (52 percent) already had high concentration and became further concentrated in this five-year timeframe, according to AMA’s calculations.
GIRS reviewed the factors driving the Aetna, Anthem, and Centene merger back in 2015. First, they seemed to be expanding their product mix to create collaborations and mitigate risk by expanding their contributions across market segments and experimenting with new distribution channels in public and private exchanges. Second, by achieving greater scale, they lessened administrative costs, reinforce their negotiating ability with local providers, and pursued value-based payment arrangements.
These value-based payment arrangements were the focus in some of the top mergers of 2020 despite the pandemic.
Most recently, Oscar Health released the news that it plans to partner with Holy Cross Health and Memorial Healthcare System to launch a co-branded Medicare Advantage plan. Holy Cross Health is a health, academic and research institution and Memorial Healthcare System is a healthcare system that provides various services from pediatrics to cancer treatment. This plan will serve the southern Florida area. Structurally, it emphasizes coordinated care as well as virtual care through a connected care team and free, unlimited virtual care visits.
Aetna and Cleveland Clinic announced their new Aetna Whole Health partnership in early August. While this was not a merger or acquisition, it served a significant purpose for its region by creating a joint health plan. The health plan will serve the Ohio area and will be available to fully insured and self-insured employers across ten counties in the state.
Sentara Healthcare and Cone Health declared their intent to merge in mid-August. The two companies are separate, integrated healthcare systems that each have their own health plans related to them. The combined company will serve around 875,000 members across the Virginia, North Carolina, and Ohio regions.
Sentara has two health plans:
- Optima Health Plan
Optima Health Plan offers commercial products including employee-owned and employer-sponsored plans, individual and group health plans, employee assistance plans, and Medicare and Medicaid plans.
- Virginia Premier Health Plan
Virginia Premier Health Plan is the first and the sole nonprofit managed care organization in Virginia. The health plan encompasses Medicare, Medicaid, and health insurance exchange plans.
Meanwhile, Cone Health has a Medicare Advantage health plan.
Highmark and HealthNow’s consolidation is not a traditional healthcare merger or acquisition, because it is occurring within the Blue Cross Blue Shield system. There will be no transaction and very little external change. This affiliation will enable HealthNow to take advantage of Highmark’s resources, tools and advanced technologies.
Geisinger no longer serves as the parent organization of AtlantiCare. AtlantiCare voted to break away from Geisinger in September 2019, and the systems announced in March that they were separating the merger. They finalized the transaction October 31, 2020. The two systems will continue their collaboration on the New Jersey campus of the Geisinger Commonwealth School of Medicine.
All of the consolidations and partnerships will have to receive regulatory approval and go through the final procedures to close the agreements before they are open to the market.
As payer markets grow and consolidate, GIRS is #LookingAheadoftheCurve by educating clients about the potential impact on their payer mix and redefining payer market access strategies to secure coverage and preferred status for their products. The GIRS Payer Advocacy Compass PAC® team has over 17 years of experience tracking payer market trends and policies and educating providers and stakeholders about changes to ensure coverage and reimbursement of our clients’ medical technologies.
Disclaimer: The information in this blog is based on payer information which is dynamic. It is accurate at the time of posting but should not be construed to be reimbursement or legal advice. CPT® is the trademark of the American Medical Association (AMA).
Sources:
https://www.healthaffairs.org/do/10.1377/hblog20151201.052023/full/
About GIRS
For more than 17 years, GIRS has been assisting medical technology manufacturers with their market uptake and reimbursement strategies so that patients can have access to the care that they need. To implement successful market access strategies, the GIRS Value Discovery Landscape Assessments® team and the Payer Advocacy Compass® team work together to develop and implement foundation reimbursement landscape and payer advocacy strategies to obtain positive coverage, appropriate payment, and innovative payer contracting arrangements to improve market uptake. For more information, email us at info@girsinc.com or call us at 901-834-9119.