Mergers of large health insurance companies have been in the news in recent months, but an editorial from Health Affairs suggests it remains to be seen if such deals are truly beneficial.

Paul von Ebers, president and CEO of Prospective Health, wrote the editorial, examining the recent mergers between Aetna and Humana; Anthem and Cigna; and Centene and Health Net.

“Many benefits of megamergers put forward by these companies will not materialize, and there will be few benefits for consumers,” von Ebers wrote. “Wall Street is understandably skeptical.”

Von Ebers explained that the reasons insurers give for making these massive deals can be broken down into three basic categories: scale economies, leverage in negotiations with hospitals and physicians, and diversification.

Are they legitimate reasons? When it comes to scale economies, von Ebers isn’t sold.

“Several studies of health insurers have found little or no economies of scale following mergers,” he wrote. “Studies in other industries suggest that even when economies of scale exist, the advantages dissipate with very large company sizes. Since administrative costs are a small portion of health insurance prices (10 to 15 percent, on average) it would take a large reduction in administrative costs to create a meaningful price reduction.”

Anthem and Cigna have published estimates of close to $2 billion in savings, von Ebers said, while also indicating no employees will be let go from either company. If $2 billion is really going to be saved in this instance, it may have less to do with economies of scale and more to do with other aspects of the deal.

When it comes to gaining leverage in negotiations, von Ebers noted that there is actually more to consider than meets the eye. Looking again at the Anthem/Cigna merger, he wrote that even if the new company isn’t forced to divest any Cigna businesses due to anti-trust worries, its market share still won’t necessarily make that large of a difference.

“I have had responsibility for provider negotiations in health plans with 35 percent, 60 percent, and 80 percent market share,” von Ebers wrote, referencing his own time working out deals in the insurance industry. “In my experience, a 60 percent market share plan does not always yield substantially lower pricing than a 35 percent share plan. Thus, Cigna’s impact on Anthem negotiations may not be great. Cigna customers will benefit from the lower prices Anthem already has, but Anthem customers won’t see much improvement.”

In the cases of Aetna’s acquisition of Humana and Centene’s acquisition of Health Net, von Ebers added, the total national volume would increase, so there would certainly be a benefit in future negotiations.

When it comes to that third category, von Ebers said some of these companies will see big benefits in terms of diversification. Centene, for instance, will be more stable thanks to Health Net’s commercial and Medicare business.

However, there is once again uncertainty related to the Anthem/Cigna merger.

“Anthem will bring expertise to Cigna in the individual market, but might not overcome the strength of local Blue Plans in non-Anthem states,” he wrote. “Cigna’s Medicaid business may improve Anthem’s position in this segment. Cigna brings behavioral health expertise through its Healthspring subsidiary. Compared to the significant benefits obtained by the other two mergers, these benefits are not game changing.”

The editorial concludes with a look at the uncertain future ahead. If costs rise over the next several years as CMS is projecting, does that throw any benefits gained from mergers completely out the window? Only time will tell.

The full text of Von Eber’s editorial can be found on the Health Affairs website.