The Flip Side of the Coin: A Look at the Increase in Health Insurer Consolidation

A couple weeks ago, Regs & Eggs took a look at the significant increase in provider consolidation and the actions (or lack thereof) the federal government has taken to address this trend. I thought it would be useful this week to analyze the flip side of the coin—health insurer consolidation, along with all the bad insurer behavior that comes along with it.

The American Medical Association (AMA) published a comprehensive study last year of health insurance concentration for 384 metropolitan statistical areas (MSAs), the 50 states, and the District of Columbia. The report detailed some stark, but not shocking, results about how concentrated many health care markets across the country really are. I encourage you to read the report, but overall, the AMA finds that:

• 73 percent of the MSA-level markets were considered highly concentrated according to federal guidelines set by the Department of Justice (DOJ) and the Federal Trade Commission (FTC).
• 46 percent of MSA-level markets and fourteen states had one insurer with a share of 50 percent or more of the commercial health insurance market.
• 57 percent of markets became more concentrated in 2020 compared to their concentration level in 2014.
• The 10 largest health insurers in the U.S. at the national-level by market share were: 1. UnitedHealth Group (15%), 2. Anthem (12%), 3. Aetna (11%), 4. Cigna (10%), 5. Kaiser (7%), 6. Health Care Service Corp. (6%), 7. Blue Cross Blue Shield of Michigan (2%), 8. Blue Cross Blue Shield of Florida (2%), 9. Blue Shield of California (2%), and 10. Centene (2%).

According to the AMA’s report, health insurer consolidation can lead to “monopsony power—the ability to reduce and maintain input prices (e.g., prices paid to physicians) below competitive levels.” It makes intuitive sense that the more power a particular insurer has in a market, the greater its ability to lower payments to physicians. The Kaiser Family Foundation confirms that finding and states that health insurers do NOT pass along the savings from lower provider payments to consumers through lower premiums. The FTC and DOJ have stepped in and stopped some insurer mergers, and the AMA believes that health insurer consolidation would have been even worse without any intervention from the federal government.

While the AMA’s study provides a great overview of the rise in health insurer consolidation, I wanted to also touch upon some recent reports and observations concerning insurer consolidation in the Medicare Advantage, Medicaid Managed Care, and commercial markets.

Medicare Advantage, as you all know, is the private plan alternative to traditional fee-for-service Medicare. The growth in Medicare Advantage has truly been astonishing, and in 2021, 42 percent of Medicare beneficiaries (more than 26 million people) were enrolled in Medicare Advantage. Enrollment has more than doubled over the last decade. A recent article in Modern Healthcare reported that, as of this year, seven national health insurance companies claimed nearly 70% of Medicare Advantage (UnitedHealthcare, Humana, Aetna, Anthem, Centene, Cigna, and Molina). While these insurers, especially UnitedHealthcare, may appear to be dominating the Medicare Advantage market, you have to consider the other insurers that represent the remaining 30+ percent of the market. All in all, the steep growth in Medicare Advantage enrollment presents an excellent opportunity for other health insurers to take a piece of the action. In fact, the Modern Healthcare article quotes a UnitedHealthcare executive who characterizes the Medicare Advantage market as “highly competitive.”

As emergency physicians, the Medicaid managed care market should particularly interest you—since, on average across the country, most of the people who come to the emergency department (ED) are covered by Medicaid. According to a 2021 analysis conducted by the Georgetown University Health Policy Institute, “over forty states and the District of Columbia were contracting with over 280 different managed care organizations (MCOs). The federal government and states combined spend in the neighborhood of $360 billion per year paying these MCOs to provide covered services to approximately 70 percent of all Medicaid beneficiaries and 80 percent of child beneficiaries.” Even with so many players in the game, the Georgetown analysis states that over half of the Medicaid managed care market is controlled by “publicly traded companies,” with the “Big Five” being Aetna/CVS, Anthem, Centene, Molina, and UnitedHealth Group. You can find out even more information about Medicaid managed care enrollment and trends by looking at data from the Kaiser Family Foundation.

Unfortunately, it is in the Medicaid managed care market where we have seen some egregious insurer behavior related to emergency care—all in the name of “reducing unnecessary costs” and saving both the state and federal government money. However, given the profit motive of many of the insurers in the Medicaid managed care market, reducing government spending probably isn’t the only driving factor influencing their decisions. Some of these actions have been blessed by the state and by the Centers for Medicare & Medicaid Services (CMS)—again, as part of efforts to cut spending— and some have not. However, in the cases where the state and/or CMS eventually asked the insurers to claw back or rescind their policies, ACEP and others in the emergency medicine community have first had to send letters, contact members of Congress, and meet with CMS and the state directly.

While there are too many examples of bad insurer practices within the Medicaid managed care market to list here, most recently, we have been dealing with many policies that potentially violate the Prudent Layperson Standard (PLP). As background, the PLP is an extremely important patient protection which allows people who reasonably think they are having an emergency to come to the ED without worrying about whether the services they receive will be covered by their insurance. In many cases, patients do not know whether they are having medical emergencies when they come to the ED. You as emergency physicians, in turn, cannot determine a patient’s final diagnosis (or whether they have an emergency or non-emergent medical condition) based on the patient’s symptoms when they first present to the ED. Many conditions share very similar symptoms, and a full work-up and examination is frequently required (sometimes with additional diagnostic tests) before it becomes clear what the ultimate diagnosis is.

CMS has made it very clear that denying coverage based solely on a retroactive review of diagnosis codes is a violation of the PLP. As you may recall, ACEP and the Emergency Department Practice Management Association (EDPMA) successfully convinced CMS to insert language that strongly reinforces the PLP into the first regulation implementing the No Surprises Act.

However, what is less clear is whether another inappropriate practice-- downcoding based on the use of diagnosis codes—is a violation of the PLP. ACEP believes that it is. If claims are downcoded by health insurers, the services are still covered by the insurers (rather than denied), but the level of service on the claim (i.e., the payment amount) is changed. CMS doesn’t explicitly state that downcoding is a PLP violation in the No Surprises Act reg, and even includes a footnote in the reg stating that health insurers are allowed to take “diagnostic codes into account when deciding payment for a claim for emergency services.” However, in the past, CMS has put out statements suggesting that modifying payments based on a diagnosis list is a potential violation of the PLP. In a State Medicaid Director letter issued in 2000, CMS stated that “whenever a payer denies coverage or modifies a claim for payment, the determination of whether the prudent layperson standard has been met must be based on all pertinent documentation, must be focused on the presenting symptoms (and not on the final diagnosis), and must take into account that the decision to seek emergency services was made by a prudent layperson..” (emphasis added).

CMS has stepped in on at least one occasion (in Kansas) to halt a downcoding policy based on the rationale included in the State Medicaid Director letter—but in other cases has failed to intervene. Insurers in the Medicaid managed care market have therefore exploited this ambiguity in CMS’ policies and inconsistent enforcement of the PLP and have continued to institute policies that automatically downcode ED evaluation and management (E/M) services based on a review of a list of diagnosis codes that are supposed to reflect non-emergent care.

For example, at the end of last year, CMS approved a policy from Virginia Medicaid, whereby ED E/M services that were billed at a level 2 through 4 will automatically be paid at the rate of a level 1 service if the primary diagnosis is found on a list of 800 diagnoses. This list is called the “Preventable Emergency Room Diagnosis List.” ACEP has a meeting with CMS next week to push back against this policy, using the same line of arguments that I stated above: mainly that people with both life-threatening and non-life-threatening conditions often share similar symptoms when they first present to the ED, and that it is many times impossible for you as emergency physicians to determine a patient’s final diagnosis before you perform a full work-up and examination. We will also mention that CMS in the past has made statements that would suggest that this policy is a violation of the PLP.

Another recent (and horrible) policy in the Medicaid managed care space also relates to the PLP, since it involves payment denials for emergency services. Optum, a subsidiary of UnitedHealthcare, instituted a policy in Maryland that only allows certain specialists who identify as “mental health practitioners” to bill for services delivered to patients in the ED who have a primary diagnosis related to a mental health condition. In other words, emergency physicians in Maryland who, as you well know, treat people with mental health disorders on a routine basis, aren’t allowed to bill for any mental health services they deliver to their Medicaid patients!

This policy is as ridiculous as it sounds, and ACEP and emergency physician advocates in Maryland have appealed to the state. While it first appeared that Optum retracted its policy based on a request from the Maryland Department of Health, Optum is now stating that the policy is still in effect. ACEP has also met with Senator Cardin’s (D-MD) office to alert the Senator to this issue, and we hope that the Senator, along with the Maryland Department of Health, will finally get Optum to officially retract its policy.

Moving away from the Medicaid managed care market, I wanted to also highlight a policy that CMS proposed recently aimed at addressing an insurer consolidation issue that has arisen in the commercial market. In the 2023 Affordable Care Act (ACA) Exchange proposed regulation, CMS describes a practice by health insurers to circumvent their medical loss ratio (MLR) requirements by giving providers additional bonuses and incentives.

Let’s parse this one out, as it may at first seem counterintuitive that health insurers would ever be paying more money to providers. First, the MLR is a requirement from the ACA that health insurance companies spend at least 80 or 85 percent of the premiums they collect on medical care. If an insurer fails to meet the MLR standard in any given year, it is required to provide a rebate to its customers. Insurers are allowed to count bonuses that are paid to providers to incentivize higher quality care towards their MLR requirement.

However, in the reg, CMS states that some health insurers are paying out these bonuses any time they come close to failing to meet the MLR threshold. Thus, instead of paying MLR rebates to consumers, they instead pay out bonuses to providers. And why would they do that? You may have already guessed, but it’s because in most circumstances, the health insurer owns the provider group or hospital system to which it is paying the bonus. This form of insurer consolidation—buying physician practices and hospital systems—is quite prevalent. According to a Modern Healthcare article, UnitedHealth Group employs 60,000 physicians and CVS/Aetna wants to add 10,000 pharmacists and primary care professionals to its payroll. To address this issue, CMS proposes in the reg to only allow provider incentives and bonuses that are tied to “clearly defined, objectively measurable, and well-documented clinical or quality improvement standards” to be counted towards the MLR calculations.

Well, that was my brief overview of insurer consolidation, and just as I concluded my previous blog on provider consolidation, I want to point out something that is crystal clear: the dramatic increase in insurer consolidation that the majority of markets across the country are witnessing isn’t likely to slow down anytime soon.

Finally, since I spent so long discussing bad insurer behavior, here are some tips you can take if/when you experience a problematic insurer policy:

• Contact your state Department of Insurance and report violations of the PLP by your insurer.
• Keep sending denied claims back to the insurer – it costs them money to deny claims.
• Contact ACEP if you receive a letter from an insurer implementing a new non-emergent use of the ED policy, such as diagnosis lists.
• Advocate for fair and reasonable coverage for emergency care to your state and federal legislators.
• With respect to Medicaid managed care specifically, there is an appeals process. First, appeal directly to the MCO, then to the state. After that, you can go through arbitration/mediation-- the state still has fiduciary responsibility to hear complaints.
• Encourage your patients not to delay necessary care!

Until next week, this is Jeffrey saying, enjoy reading regs with your eggs!