How much do you pay for your Medicare Advantage premium? That number could go up for seniors enrolled on a plan from Louisville-based insurer Humana Inc. (NYSE: HUM) or Connecticut’s Aetna Inc. (NYSE: AET), if the merger of those two companies goes through.
That’s according to a new report from the Center for American Progress (CAP), a think tank founded by former White House staffer John Podesta who worked under presidents Bill Clinton and Barack Obama. The report is cited here by Reuters.
So why does CAP think premiums could go up for the seniors who are on Aetna and Humana Medicare Advantage plans (and really, the government, which pays for most of those plans)? Economics – specifically, price competition.
Humana controls 19 percent of the Medicare Advantage market, and Aetna controls 7 percent, according to Reuters. If they combine, the resulting company would control a little more than a quarter of the total market for those plans.
But that means there will be less competition in those markets. More competition often means lower prices, as the players all try to undercut each other. Less competition has the opposite effect.
Humana and Aetna currently compete in several markets. In those markets, one CAP analysis showed that the average customer of either company paid about $302 less for their Medicare Advantage premium, Reuters reported.
Another, more conservative analysis showed Humana Medicare Advantage customers paid about $43 less on average in those markets, and Aetna customers paid $155 less, according to Reuters.
Humana agreed in July to be acquired by Aetna for $37 billion in a deal that would create the second-largest managed-care company in the United States.
The acquisition is expected to close in the second half of 2016, creating a company with a projected operating revenue of about $115 billion, with about 56 percent from government-sponsored programs such as Medicare and Medicaid.
That deal already has been green-lighted by both companies’ boards and shareholders, but it will need approval from the Justice Department because of the antitrust concerns.
Date: January 22,2016