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Big Health Carrier Mergers - Now What?

There is a lot of speculation about the impact of recent industry consolidation. One thing is certain; the acquisitions of Cigna by Anthem and Humana by Aetna will certainly reduce competitive options in many markets. Time will tell if it helps lower prices to employers and consumers as claimed.

The key priorities of the Affordable Care Act (ACA) were to expand coverage by reducing the number of uninsured and to address the issue of affordability of coverage. There have been many contentious underlying issues played out in Congressional grandstanding, controversial Supreme Court decisions, and of course, no shortage of media pundits stirring the pot from every aspect of this monumental piece of legislation. While the number of uninsured has been declining as intended, the question of reducing underlying costs and premiums remains elusive (assuming you discount the use of subsidies to artificially reduce consumer costs).

The cornerstones of the ACA legislation were intended to create more coverage choice and options. Federal funding was provided to State and Federally- operated marketplaces as a more efficient way to purchase healthcare coverage as well as generate, in certain states, a significant number of new health plans or Co-Ops. Enrollment has been steadily climbing through both of these newly created outlets, but, the issue of sustainable affordability in both public and private markets still remains a question.

The rhetoric about how these big mergers and industry consolidation will be good for employers and consumers sounds a lot like the airline industry’s claims during its consolidation.  The companies in question have stated that the mergers will give them the size and clout to compete and control costs.  Sounds impressive and desirable, but now what?

The Justice Department, and undoubtedly many state Attorney Generals, will be carefully reviewing these deals, both individually and collectively. They’ll be determining if these promises will be favorable to their members or ultimately prove to be anti-competitive. Scrutiny will likely be intense and the merger approval process remains murky.

There are many implications that could arise from this consolidation. Our experts and advisors will continue to examine the impact to all affected parties and keep you informed as well as address the broader theme of rising medical costs and emerging cost control innovations.

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