You Can’t Deny The Facts

posted by Alicia Caramenico

on August 6, 2015

Given the recent focus on consolidation in the health care industry and how such activity would impact the cost of coverage, it’s crucial to bear in mind several important facts:

Fact: Health plans are in the business of keeping coverage and out-of-pocket costs affordable for their customers. They negotiate lower prices with network providers that can save a patient thousands of dollars for one care episode. What’s more, health plans offer consumers a wide range of choices and plan types, empowering consumers to pick the coverage that works best for them.

Fact: Health insurance premiums track directly with the underlying cost of medical care. The rising cost of doctor’s visits, hospital stays, and prescription medications all put upward pressure on premiums, as noted in a new issue brief from the American Academy of Actuaries.

Fact: Simply comparing premiums across health plans overlooks local market forces. Various factors at the local level, specifically provider consolidation and the overall health of individuals in the risk pool, largely affect what premiums look like and can make health care coverage more expensive for individuals, families, and employers.

Fact: The federal medical-loss ratio caps administrative expenses. This ensures the vast majority of premium dollars are devoted to medical expenses, making it clear that soaring medical costs – not health plans’ administrative costs – are driving premium increases.

Fact: Proposed health plan mergers are reviewed under the same laws and standards as other transactions. These reviews take several months and take into account all lines of business across various states.

Fact: Evidence demonstrates increasing provider consolidation leads to higher prices for consumers. People living in highly consolidated hospital markets pay significantly higher premiums than residents in markets that have less provider consolidation, according to a recent data brief. When providers consolidate and gain more market power, they have an incentive to demand higher prices, which in turn makes premiums and costs for patients even higher. Other studies have clearly demonstrated the link between provider consolidation and higher health care costs.

As a Forbes article noted today, health care providers have been consolidating at a record pace, threatening coverage affordability for consumers and businesses. More information on why provider consolidation is bad for consumers is available in our new slide deck presentation.

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