As insurers embark on a new wave of mergers and acquisitions, lawmakers in the House and Senate, regulators, consumer advocates, and health care providers are asking tough questions about the likely impact of these combinations. Much has been written about how health insurance mergers raise premiums even as they reduce prices paid to providers. But very little has been said about the impact of consolidation on insurance innovation.
In part this oversight is the result of decades of inattention to insurance innovation. After all, insurance plans today can be described using virtually the same terms as 35 years ago: deductibles, coinsurance rates, and limitations on certain services. Interest in a slightly different model—the classical, tightly-managed health maintenance organization (HMO)—has waxed and waned, and even those models have adopted the standard financial characteristics of other health insurance arrangements.
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