Consolidation in Health Care Markets: Are Higher Prices Inevitable?

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Proposed mergers in the health insurance industry and consolidation occurring among hospitals and physician groups are raising alarms that major premium and price increases are soon to follow. In a new <a href="/publications/issue-briefs/2015/nov/evaluating-impact-health-insurance-industry-consolidation">Commonwealth Fund issue brief</a>, Northwestern University health care economist Leemore S. Dafny reviews the recent history of insurer consolidation, finding that mergers tend to lead to premium increases, despite the lower provider prices that carriers with large local market shares are generally able to command.<br /><br />
Dafny calls for requiring detailed reporting on insurance enrollment, plan design, premiums, and medical loss ratios for every commercial health plan, which she says will allow regulators and others to monitor market developments and intervene, if necessary.<br />
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Focusing on consolidation in provider markets, The Commonwealth Fund’s Eric Schneider, M.D., says in his <a href="/blog/2015/provider-mergers-will-patients-get-higher-quality-or-higher-costs">new blog post</a> that hospital–hospital and physician–hospital mergers have also resulted in higher prices, though he notes most evidence predates the rise of accountable care organizations. As the government encourages insurers to pay providers for achieving measurably better patient outcomes, there is some hope, Schneider writes, that this will “reinject needed competition among providers.”