The pending mega-mergers of Anthem with Cigna and of Aetna with Humana will most likely do what they?re designed to do: maximize profits of the companies? corporate shareholders. But this will come at a price?still hard to quantify?to consumers of health insurance and to the sellers of healthcare services and goods.

These mega-merger deals further concentrate the market power of the ?big five? publicly held insurers?which together control the healthcare access of 107 million Americans, or 46 percent of all privately insured lives?into a new ?gigantic three.? The third insurer, of course, is behemoth UnitedHealth Group, which recently purchased the nation's fourth-largest pharmacy benefit manager, Catamaran.

The impact of these combinations will be felt much more sharply in some local markets than in others. The insurer that controls an outsize segment of the insured population in any local market can leverage that market share to charge higher premiums or negotiate lower rates from providers. It's hard to imagine that these combinations won?t make things harder for employers seeking a better deal on health coverage, for hospitals facing rate negotiations, or for physician groups hoping to stay independent.

In markets where Anthem already is the dominant commercial insurer, for example, the elimination of Cigna and Humana as coverage options will result in less competitive pressure to keep premium rates down. For large physician groups seeking to establish value-based contracts with insurers, they may find themselves having to accept less-than-favorable terms just to keep in-network status with their patients.

The trend toward narrow and tiered networks will make it easier for dominant health plans to play hardball with hospitals, tying favorable network status to bare-bones rates. Likewise, in specialties such as oncology, pressure to accept insurer-created ?clinical pathways? may overly restrict patient access to certain therapies. Many oncologists are already seeing this dynamic at work in their practices.

Some believe these mergers will prompt large, integrated hospital systems to create their own insurance arms to compete for local business. That's certainly possible, but while such entities may offset the anti-competitive effects of the mergers in their MSAs, it's not likely to be a widespread trend.

The Anthem-Cigna and Aetna-Humana consolidations will draw the attention of federal antitrust regulators and state insurance commissioners for good reason: because they will diminish choices for the purchasers of insurance, and will concentrate the purchasing power of those who control access to hospitals, physicians, pharmaceuticals, and other health services across the United States.

For Anthem-Cigna, the deal creates the nation's largest commercial insurer, with 22 percent of the U.S. commercial market, compared with UnitedHealth's 14 percent and Aetna-Humana's 13 percent. Aetna-Humana will overtake UnitedHealth as the nation's leader in Medicare Advantage, with 25 percent of MA membership nationwide (compared with UnitedHealth's 20 percent).

Most experts believe the deals ultimately will win approval, with the combining companies forced to divest some operations in localities where their concentration is deemed excessive. But where will regulators draw the line? How much market control by one or two insurers will be considered too much? Will regulators consider the effect on healthcare purchasing by insurers? And will regulators set a different standard of over-concentration in Medicare Advantage (where consumers can opt for Medicare supplement policies) than in commercial insurance? We don?t know.

The fact is, so many insurance markets are already heavily concentrated, and employers, hospitals, and health providers are already dealing with the effects of that concentration.

The best-known tool for assessing competition among health insurers, the Herfindahl-Hirschman Index, measures how market share is distributed across insurers in the market. The index sets a range from 0 to 10,000; the larger the number, the less competitive the market. An HHI above 2,500 is considered a highly concentrated, uncompetitive market.

The HHI for the commercial market in Richmond, Virginia, for example, shows the MSA's current index is 3,155;*  Anthem has 50 percent of all commercial lives, Aetna has 20 percent, Cigna has 14 percent, and UnitedHealth has 8 percent. With the combination of Anthem and Cigna (combined market share of 60 percent), the post-merger index is 4,545.

Is that too much? We don?t know yet.

*These calculations use HealthLeaders-InterStudy January 2015 total commercial membership data and the HHI methodology, which adds the square of the percentage of local market share of each carrier.

Follow Paula Wade on Twitter @PaulaWadeDRG

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