As the January 1st, 2016 benefits renewal season and open enrollment process is in full swing for many employers, questions loom about the impact of the pending Aetna/Humana and Anthem/Cigna acquisitions, most predominately--is a bigger carrier really better?
That's the question CEOs from these carriers are currently defending in front of Congress and Justice Department officials who want to understand if these mergers will be a positive game-changer for employers and consumers or if they will limit competition and actually increase costs.
The review process will take months and stretch well past the current renewal season, leaving many wondering how it will all shake out. The range of outcomes will likely run the gamut from outright approval to divestiture in designated markets—to not approved—which is probably the most unlikely result. Overall, it's not about any one deal, but how the approval of both transactions may adversely impact choice and affordability for the corporate and individual purchase of health insurance coverage. Let's look at each deal and examine the implications of these consolidations and what the government may be most concerned about.
The Aetna/Humana deal at a high level combines Aetna's strong nationwide employer-focused medical business with Humana's large and very successful Medicare Advantage business. In the employer arena, there are some overlapping markets that may raise concerns from regulators and create a possible need for divestments, but our assumption is that the impact will not be significant.
The Anthem/Cigna deal appears complementary in certain core areas, but has a couple of interesting dynamics. Anthem brings a real expertise in small group and individual exchange market presence. They provide significant national account capabilities in conjunction with their access to the nationwide Blue Card and all the Blue Cross Blue Shield (BCBS) plans across the country. Additionally, Cigna is a strong carrier in the mid-market and national account segments, with a compelling blend of medical plan funding options. Their expertise in group insurance and pharmacy benefit management are additional strengths. Like the Aetna/Humana deal, there may be added scrutiny in certain markets that regulators will examine very closely.
The interesting twist facing Anthem/Cigna is not so much a regulatory issue, but more related to how the independent Blues organizations will respond to the ongoing access to the Blue Cross Blue Shield (BCBS) network in states where Anthem has no presence. Anthem is very dependent on these networks for multi-state employers. Cigna currently competes in many of the independent BCBS states, so the question remains, will they get the same access to the BCBS networks when they become part of Anthem? The assumption is no, but the merger will certainly test Anthem's relationship with the BCBS Association. Anthem seems confident that there will be no disruption in their ongoing partnership with these independent BCBS organizations, but only time will determine the success of this aspect of the deal.
While the scrutiny of these mergers continues to unfold, carriers will increasingly be expected to answer the following questions:
- Will medical premiums go down or rise more modestly in the future?
- Will touted efficiencies and service levels improve the customer experience after the integration?
- Will we see disruptions or expansion of choice in providers?
- Will the carriers need to divest in certain markets where the consolidation will be deemed anti-competitive?
Stay tuned for these answers and more as we continue to monitor this rapidly changing area of the industry.