Q&A With UConn Law Professor John A. Cogan Jr.
What was the immediate effect of the Supreme Court’s ruling in King v. Burwell?
The major effect was to cement the federal government’s implementation of the law. The case dealt with a very specific issue: the subsidies offered to low- and moderate-income people. Unlike the previous ACA case, King v. Burwell wasn’t a constitutional challenge, it was based purely on a question of statutory interpretation: Could the government give out subsidies? The Supreme Court said yes. Since the constitutional and major statutory challenges have failed, we may see opponents attempt to chip away at portions of the ACA they do not like, but I think it’s safe to say we won’t see any more major cases attempting to unravel the whole law.
In the wake of the decision, we saw announcements by insurer Aetna that it intended to buy competitor Humana, and then that Anthem would buy Cigna. That would bring the number of major health insurers in the U.S. from five to three, with UnitedHealth the third. How will these mergers benefit the insurance companies, and how will they affect health care providers?
The post-merger companies will each have a larger share of the market, thereby consolidating their power. Consolidation allows insurers to increase profits through efficiency gains. But these larger insurers will also gain bargaining power with healthcare providers. This is important because providers are paid directly by insurers. If you have doctors and hospitals negotiating with several different insurers, they have the ability to walk away from any one of those insurers, giving providers some leverage. But if there are only two insurers, that leverage is diminished. Major hospital systems and large physician groups will still have some bargaining power because of their size, but individual physicians will see their bargaining power diminish further.
Will the effect of the mergers be in line with the intent of the law?
The ACA’s express intent was to expand coverage, and it worked. There’s nothing in the ACA regarding industry consolidation. Nevertheless, the fallout of the ACA’s expansion of coverage – efforts by insurers to consolidate market share – was foreseeable. Now that the ACA is here to stay, federal and state regulators will have to wrestle with consolidation issues.