As number of insurers shrink, patients face dwindling choices

Mergers are sweeping health care, as insurers, hospitals and doctors seek economic shelter from Washington by linking up and getting big.

These merger trends were underway prior to Obamacare. But there’s little question that the law purposely hastened these developments.

The law’s architects saw big insurers, big health systems and big hospitals as the best platforms for delivering medical care. Size, it was wrongly believed, would lead to more efficiency. It would also make medical care easier to regulate from Washington.

While we’ve seen other waves of consolidation sweep the health care sector, most recently in the late 1990s, the current series of mergers and acquisitions is different.

The hookups are bigger and more pervasive. They’re also unfolding in an industry that was already heavily consolidated. As a result, the impact on your medical care will be profound.

When it comes to the mergers among health plans, the bigger issue isn’t the consolidation of the nation’s five largest insurers into three.

It’s the fact that far fewer new health plans are forming to replace the plans that have been acquired. New regulations, many of which were ushered in along with Obamacare, have made it too hard and too costly to start a new plan.

As a consequence, the number of distinct health plan choices people have at work or even on the Obamacare exchanges has shrunk under the Obama presidency.

Only about 50 new health carriers have entered the commercial market since 2008, according to a November analysis from the investment firm Goldman Sachs.

Of that number, at least half of these new plans are the struggling “co-ops” that Obamacare heavily subsidized, on an egalitarian premise that these notfor-profit health plans would be able to channel more of their revenue into medical care, since they didn’t aim to turn a profit.

But today, all of these “co-op” plans are struggling financially. One has already filed for bankruptcy. The concept is widely perceived as a bust.

At the same time, around 40 health plans also left the market over this same stretch of about seven years. Some merged with competitors, but at least 13 were shut down or liquidated.

Working with research staff at the American Enterprise Institute, I developed similar data that shows even fewer new health plans entering the market since 2008.

Taylor Jones, Hoover Digest

Donna Grethen, Tribune Content Agency