Center for American Progress

RELEASE: Divestitures Are Unsuccessful in Keeping Medicare Advantage Competitive
Press Release

RELEASE: Divestitures Are Unsuccessful in Keeping Medicare Advantage Competitive

Washington, D.C. — A new issue brief published by the Center for American Progress today found that when it comes to maintaining competition around health insurance mergers, requiring companies to divest is not necessarily the solution. CAP’s new analysis sheds further light on the divestitures in Medicare Advantage plans that were required as part of the 2012 merger between Humana Inc. and Arcadian Management Services Inc.

This new analysis shows that the divestitures in the previous merger failed to restore competition and that seniors paid higher premiums for the divested plans. The acquiring partners exited more than half of the affected counties by 2015, only 2 of the 15 divested plans are offered today, and premiums increased for more than half of the divested plans by 44 percent, on average. These results predict that divestitures in the proposed Aetna-Humana merger also would fail to be successful in maintaining competition and protecting seniors. The analysis includes detailed information for divested plans by county and by year in the Humana-Arcadian merger.

“As federal and state regulators review proposed insurance mergers in the coming months, our findings are a reminder to set a high bar in considering these mergers, as divestitures may be unlikely to preserve competition in Medicare Advantage markets,” said Meghan O’Toole, Policy Analyst at CAP and a co-author of the brief.

In January, CAP examined how the proposed Aetna-Humana merger would greatly reduce market competition for Medicare Advantage beneficiaries in the markets they serve. CAP conducted a regression analysis to measure the effect of competition between Aetna and Humana on premiums and found large and highly statistically significant effects. In markets where Medicare Advantage beneficiaries currently have a choice between the insurers, CAP found that competition lowers Aetna’s average annual premiums by up to $302 and Humana’s annual premiums by $43. Under the merger, premiums actually could increase beyond these amounts because of the greater market power of the combined company.

Read today’s analysis, “Divestitures Will Not Maintain Competition in Medicare Advantage” by Topher Spiro, Maura Calsyn, and Meghan O’Toole online here.

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For more information on this topic or to speak with an expert, contact Liz Bartolomeo at [email protected] or 202.481.8151.