As a patient and former practicing physician, I am troubled by the merger craze that has swept the health care industry, from for-profit insurers to nonprofit hospital systems. The health insurance industry has become increasingly concentrated. Potential consequences include higher health insurance premiums and diminished access to care and quality of care, while private insurers rake in higher profits and their CEOs are paid staggeringly high salaries.

In 2006, 74% of the private health insurance market was controlled by just five entities: UnitedHealth Group, Aetna, Anthem, Cigna, and Blue Cross/Blue Shield (a federation of 38 independent Blue Cross/Blue Shield companies). By 2014 this market share was up to 83%. Two years ago, Anthem announced that it was prepared to acquire Cigna for almost $50 billion, and Aetna announced its intended acquisition of Humana for $35 billion. The two mergers would have resulted in an even more concentrated health insurance market, with over 80% of the private health insurance market in the hands of just three entities. (Both proposals were withdrawn after being successfully challenged by the Department of Justice on antitrust grounds.)

Not to be thwarted by regulators however, these larger insurance corporations have shifted their strategy. They’re buying up pharmacies, pharmacy benefits managers, physician groups, and other health service providers. UnitedHealth Group bought pharmacy benefits manager Optum and is working to purchase DaVita Medical Group. Humana acquired home health services provider Kindred Healthcare. Aetna merged with CVS Health (though courts are still deliberating its approval).

Add to this trend the increasing mergers of large health care providers and there’s even more to worry about.


When the only two hospital systems in the area of Appalachia where I live joined to form a monopoly last year, they said the move would help them negotiate better contracts with private insurance companies.

Prior to their merger into Ballad Health, Mountain States Health Alliance (MSHA) and Wellmont Health System experienced challenges with such contracts. In 2011, after MSHA and Cigna failed to reach an agreement, a significant number of Cigna enrollees found that their providers and hospitals of choice were no longer in their network. Many had to find new physicians. This was especially challenging since about 80% of the 21,000 Cigna enrollees were Eastman Chemical Company employees or their family members, Eastman Chemical being the largest private employer in the region. (MSHA and Cigna did sign a new contract in 2014.)

In 2014, Wellmont faced contentious negotiations with UnitedHealth Group, which had approximately 20,000 commercial and Medicare enrollees in the region. Just one week before their existing contract expired they reached a three-year agreement, sparing those enrollees the consequences faced by Cigna’s three years earlier.

The negotiations were conducted privately so it’s not known what concessions either the hospital systems or the insurance companies were able to extract from each other. The fact that there were two health systems that could be played against each other certainly strengthened the insurers’ positions. The threat of establishing a contract for a large number of insured patients with one of the systems and not the other was leverage that both Cigna and UnitedHealth Group could use in negotiations.

Now that Ballad Health is the sole hospital system however, insurance companies must negotiate with them or abandon the region altogether. With Ballad in the driver’s seat, a very real concern is that it will demand higher reimbursement rates from all private insurance carriers. Although this would be helpful to the health system’s bottom line, it would likely result in significantly higher insurance premiums for enrollees. To mitigate this prospect, both Tennessee and Virginia, in approving the merger through their Certificate of Public Advantage agreements, placed strict limits on the amount and rate of price increases that Ballad could impose. How well this will be enforced is to be determined.

One would think that when consolidated insurance companies are able to negotiate lower prices with hospitals, physician groups, and pharmacies, those lower costs would benefit enrollees in the form of lower premiums, deductibles, and co-pays. However, the opposite appears to be the usual outcome. Although studies on the matter are limited, there is good evidence that consolidation in health insurance markets is correlated with higher premiums. In addition, lack of competition between insurers tends to reduce incentives to broaden networks and to respond to patient concerns. Although insurers suggest that mergers result in more innovative health care delivery and, as a result, higher quality care, there is no evidence to date to support this contention.

Meanwhile, in recent years, revenues and profits of the largest insurance corporations have continued to flourish, as have the salaries of their executives. Total compensation for some of those CEOs in 2018 included $18.9 million (Cigna), $18.1 million (UnitedHealth Group), $16.3 million (Humana), and $14.2 million (Anthem). Apparently mergers and acquisitions are good, not only for stockholders, but also for top executives.

And as insurance companies grow ever larger, they command more bargaining power, especially when negotiating with more than one hospital system in a region. I find the concentration of commercial, for-profit insurers to be even more troubling than the creation of a hospital system monopoly in my region. For one thing, Ballad Health is a not-for-profit corporation — even if it tends to act, in the current environment, much like a for-profit system. At least their primary reason for existence isn’t to make money for shareholders.

Removal of the profit motive from payers negotiating with hospitals and other health care providers would eliminate the need for potentially harmful competition. With a single-payer, government-administered insurance program such as “Medicare for All,” hospitals and other providers would be in the position of competing on the basis of quality and value, not cost. But as long as we have a health care system dependent on insurance coverage provided largely by for-profit corporations, bigger is not better for most of us. Competition between insurers (and providers) is a good thing, and the greater the competition the better.