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Health Insurance Mergers 2015: Winners And Losers

Recent mega-mergers in the health insurance arena continue to gain momentum in 2015. Earlier this summer, Aetna proposed a deal to purchase Humana (the nation’s third and fourth largest health insurers by revenue) for $37 billion. If the deal is approved by the Federal Trade Commission and The United States Department of Justice, the combined company could create the nation’s second largest health insurer behind UnitedHealth Group.

In the industry’s most recent development, Anthem announced their bid to purchase Cigna Healthcare for nearly $48 billion. Although the transaction is subject to shareholder and government approval, this deal could continue to reshape the health insurance landscape; where improving market share is a high priority for those looking to survive and grow. However, the question now is whether or not federal officials will allow this level of consolidation to pass. All eyes will be on state and federal regulators over the next 12-18 months as they determine how the marketplace will be affected by the insurance consolidations. The central issue federal officials will focus in on is whether or not these merged companies will become so powerful, that they unfairly dominate regional markets thereby violating anti-trust laws.

It’s no secret that under the weight of the ACA, health insurance companies’ profits have suffered. In addition, new market players such as non-profit CO-OPs (Consumer Operated and Orientated Plans) and provider run ACO’s (Accountable Care Organizations) have begun to slowly chip away at their membership numbers in markets all around the country.

Even though these mergers instantly boost revenue and membership numbers for the larger entities, only time will tell if consumers will ultimately benefit from greater efficiencies and reduced costs.

Below is a snapshot of the new markets based on projected revenue and membership1:

  • UnitedHealth Group: Estimated Revenue: $154 billion, Estimated Membership: 45.8 million
  • Anthem/Cigna: Estimated Revenue: $117 billion, Estimated Membership: 53.2 million
  • Aetna/Humana: Estimated Revenue: $115 billion, Estimated Membership: 33.5 million

In the wake of this anticipated market reformation, who stands to gain and/or lose?

Potential Winners:

  1. Employers: It is likely that these mergers will give employer groups access to much larger provider networks and a wider array of products from which to choose and offer their employees.
  2. Providers: Fewer insurance companies to contract with, means fewer contracts to negotiate and less administrative burden working with these carrier partners.
  3. Members/Consumers: Larger network of physicians, hospitals and specialty providers, increases access.

Potential Losers:

  1. Employers: With the consolidation of the marketplace, employers may lose the leverage they currently enjoy when negotiating premium rates.
  2. Providers: Fewer insurance companies could mean less leverage in negotiating the best financial deal for their member partners.
  3. Members/Consumers: Less market driven competition resulting in higher rates to consumers.

Stay tuned!

1. Mathews, Anna Wilde, and Liz Hoffman. "Anthem Agrees to Buy Cigna for $48.4 Billion." WSJ. N.p., 24 July 2015. Web.