Will an Aetna-Humana merger bring higher premiums?

Published July 13, 2015

The announcement that health insurance giant Aetna would acquire fellow health insurance giant Humana had industry analysts buzzing this month.

But what does the news mean for consumers?

There's evidence to suggest that rates rise when insurance companies consolidate.

A study published in the July 2013 issue of Health Management, Policy and Innovation found that the 2008 merger between UnitedHealth Group and Sierra Health Services caused health insurance premiums in Nevada markets to spike by nearly 14 percent.

Robert Jozkowski, an assistant professor of finance at Eckerd College, pointed to a simple economic theory: When there are fewer competitors in the marketplace, prices tend to rise.

"Look at other industries throughout history," said Jozkowski, who worked in international finance and banking for more than 20 years. "I don't see why we would expect something different in health care."

A study that appeared in the American Journal of Health Economics this year reached the same conclusion. Its authors determined that premiums would have been about 11 percent lower had all active insurers offered plans on the Affordable Care Act marketplaces in 2014.

John Large, an assistant professor of health management at the University of South Florida, agrees there is a risk of premiums rising if consumers have fewer options. But he pointed out that a consolidated company could use its size as leverage to negotiate lower rates with providers — and potentially pass those savings on to consumers.

Large also noted that the Affordable Care Act has a number of consumer-protection provisions, including limits on the amount of money insurers can spend on administrative costs and profits.

"The rates shouldn't get really out of hand," he said.

Aetna and Humana have sizable footprints in Florida. Humana has about 1.5 million members enrolled in its Medicare, Medicaid and commercial plans across the state. Aetna has another 1.5 members in Florida, some of whom are covered under Coventry plans.

Humana spokesman Mitch Lubitz said members should not expect to see "major premium increases."

"We're in a good place in terms of premiums in Tampa Bay and Florida, across all lines of business," he said.

Lubitz described Aetna and Humana as "complementary companies" with different strengths in different parts of the country.

"You aren't necessarily taking away choices," he said.

An Aetna spokesman declined to comment, saying it was too early to speculate on future rates.

But a news release issued after the announcement suggested that consumer costs might drop.

The analysis by Aetna: "The combined entity will help drive better value and higher-quality health care by reducing administrative costs, leveraging best-in-breed practices from the two companies — including Humana's chronic-care capabilities that measurably improve health outcomes for larger populations — and enabling the company to better compete with more cost effective products."

Keep up with Tampa Bay’s top headlines

Keep up with Tampa Bay’s top headlines

Subscribe to our free DayStarter newsletter

We’ll deliver the latest news and information you need to know every morning.

You’re all signed up!

Want more of our free, weekly newsletters in your inbox? Let’s get started.

Explore all your options

The $34 billion deal must still survive antitrust scrutiny. It is expected to close in the second half of 2016.

Other acquisitions could follow. Last month, the insurer Cigna rebuffed a $47 billion acquisition offer from Anthem, but insiders say the companies may now be closing in on a deal.

The shakeup in the industry comes at a time when many consumers are already bracing for higher health insurance premiums. Some companies offering plans on the Affordable Care Act exchanges are projecting double-digit hikes in 2016 to correct for artificially low premiums in the first two years of the new health law.

Still, USF's Large is more concerned about what the changing landscape might mean for health care providers.

"If Aetna is the only player in the market, that's just going to give them more clout to negotiate rates," Large said. "If a provider doesn't accept the rates they are offering and gets locked out of this big pool of covered lives, they will be limited as far as who they see."

Information from the Associated Press was used in this report. Contact Kathleen McGrory at or (727) 893-8330. Follow @kmcgrory.