By Emma Chapman, J.D./M.P.P. Candidate, Georgetown University and Georgetown University Law Center

Last month, the U.S. Justice Department filed antitrust lawsuits against two key proposed mergers: Anthem-Cigna and Aetna-Humana. These mergers would have a significant impact on the national health insurance market: in the individual market, only three insurers would comprise 83 percent of the market, and Anthem would account for 21 percent (this figure does not include Blue Cross Blue Shield affiliates, many of which are operated by Anthem). In addition, only four firms would comprise 52 percent of the Medicare Advantage market, and Aetna-Humana would account for the largest share at 26 percent. Naturally, such insurer consolidation leads to concerns that consumers would be harmed by higher premiums as a result of reduced competition – hence the Justice Department’s lawsuits against the companies.

Insurers aren’t the only component of the health market that just seem to be getting larger – providers are trending towards consolidation as well. Between 2010 and 2014, there were over 450 hospital mergers and now many urban areas only have between 1 and 3 large hospital systems. And it’s not just hospitals: physician practice groups are also merging, joining large hospital systems, or acquiring individual physicians. Many providers assert that such consolidation is necessary to maintain bargaining power against insurance companies and that mergers can help mitigate expensive overhead and administrative costs, the savings of which can lower prices for consumers. Insurers, on the other hand, reply that they have to consolidate in order to gain leverage against these larger providers who ultimately demand higher rates for their services.

However, rather than providing societal benefits, evidence shows that consumers ultimately pay higher prices as a result of increased consolidation. In December, a study published in the Journal of the American Medical Association found that physician-hospital integration between 2008 and 2012 in 240 metropolitan statistical areas resulted in 3.1 percent increase in outpatient spending, attributable only to higher prices as there was no corresponding increase in utilization rates. Another study published by the National Bureau of Economic Research examined data for over 27 percent of individuals insured by employer-sponsored health plans and found that prices in monopoly hospital markets were 15.3 percent higher than markets with at least four hospitals. On the other side of the market, evidence detailed by the Commonwealth Fund demonstrates that even though insurers with larger market shares may be able to negotiate lower prices from providers, these savings are not passed on to consumers.

Regardless of the outcome of the Justice Department’s suits, it seems that the health care consolidation trend will continue into the future; Deloitte modeled health care consolidation and estimated that the number of health systems would be halved over the next decade. The question now becomes how providers and insurers can back up their claims that consolidation can have positive results for consumers when current evidence points to the contrary.