The healthcare market could be changing drastically as more insurers, drug stores, and hospitals/health systems consider mergers and new partnerships. The most recent mega-deal has CVS Health purchasing Aetna for $69 billion. Other moves are underway. United Healthcare announced the purchase of DaVita Medical Group, which runs clinics, urgent care centers, and outpatient surgery centers in 6 western states. Anthem announced that it’s getting into the pharmacy benefits management (PBM) business, saying it will save $4 billion a year. It claims the bulk of the savings would result in lower drug costs for customers. Consultants estimate that 200 partnerships between insurers and large health groups have occurred in the past five years (New York Times). According to HFMA, the number of hospital/health system consolidations doubled between 2011 to 2015.

What’s Causing the Activity?

Like UnitedHealthcare, CVS claims its purchase of Aetna will help them control their costs and become more efficient. Some companies fear new entrants, like Amazon’s rumored move into the prescription drug market, will weaken their market position. In 2016, Anthem and Cigna argued that their merger would put them in a better position to negotiate deals with doctors and hospitals that would lower medical costs for consumers (New York Times). The federal government didn’t agree, striking down the deal.

The federal government also challenged the proposed Aetna-Humana merger in 2016. In both this and the Anthem-Cigna deal, Attorney General Loretta E. Lynch said, “If these mergers were to take place, the competition among insurers that has pushed them to provide lower premiums, higher-quality care, and better benefits would be eliminated.”

Other Concerns Over Consolidation

Combining insurers with medical or pharmaceutical providers has raised a lot of eyebrows. Some of the concerns that have been voiced include:

• Limited access to doctors and other providers who aren’t part of that insurer’s network
• Doctors putting the company ahead of patient health by not ordering expensive tests
• In-house PBMs directing patients to certain drugs because of the manufacturer’s discount even if the medication is more expensive or less effective than a competitor’s.

What Does This Mean for HR?

Segal consulting senior vice president Edward A. Kaplan voiced a real concern in a New York Times article, saying HR already has “difficulty determining how much they are paying for a given medicine or a particular service.” He thinks there will be even less Rx price transparency if the PBM and insurer are the same company.

Ever increasing consolidation between insurers, providers, PBMs, etc. will require more employer/HR involvement to make sure you’re truly getting the best deals. It’s your fiduciary duty to exercise discretion or control over how the plan is operated and how its assets are managed (ERISA).

“It’s going to be harder for us to get behind the curtain”
Edward A. Kaplan

ERISA identifies specific fiduciary responsibilities:

• Acting solely in the interest of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them
• Carrying out duties prudently
• Following the plan documents (unless inconsistent with ERISA)
• Holding plan assets (if applicable) in trust
• Paying only reasonable plan expenses.

Early results indicate that vendor consolidation doesn’t lower costs. A 2016 study showed independent physician groups generated more saving for Medicare than combined hospitals and physician groups. Other studies revealed than these combinations use their greater leverage to drive prices up faster (LA Times).

You Need Data to Be an Effective Fiduciary

Relying on yearly reports provided by your vendors could be putting you at risk of breaching your fiduciary duties. You own your data and need to take control of it. To effectively understand what your costs are, you need to integrate benefits data across programs—medical, Rx, workers’ compensation, and disability at the very least. The more data sources your collect, the more information you’ll get into the trends, cost-drivers, and health of your covered members. You’ll get the transparency you’re missing, especially as insurers, hospitals/health systems, doctors and other healthcare providers, pharmacies, and vendors consolidate.

‍