Today’s trend: big mergers in the healthcare industry
Anthem bought Cigna for $54 billion last week. Aetna bought Humana for $37 billion this month. What does that mean for consumers?
This image is from ModernHealthcare.com.
If there are fewer companies to compete with, rates could rise. Historically, mergers of big insurers have caused the price of premiums to increase.Some suggest that prices will go down.
Insurance companies say the deals would substantially reduce their own costs, allowing them to charge consumers less for their plans.
Some say the future of the deals is uncertain.
The mergers will be reviewed by the federal government, with special attention paid to anti-trust laws. Some believe they won’t go through at all. If the deals are upheld, they won’t go into effect until 2016.
Insurers aren’t the only ones joining forces.
- CVS, the largest drugstore company in the US, bought Target Pharmacy for $2 billion in June. The 1,660 Target Pharmacies nationwide will eventually be CVS pharmacies.
- Centene, a Medicare and Medicaid health plan provider, bought Health Net, a health plan provider in the same industry, for $7 billion in early July.
- The biggest generic drug producer in the world, Teva, bought Allergan, a manufacturer of generic drugs best known for making Botox, over the weekend for $40.5 billion.
- Insurers are merging because they want to cover more of the market. With the influx of customers from the Affordable Care Act, and the revenue from Medicare and Medicaid, they are buying companies with these strengths.
- When one subset of the industry begins merging and combining market power, the companies on the other side want to do the same. To maintain power in negotiations and stay afloat in the changing industry, companies see merging as the answer.
Tom says:
“Generally speaking, when an industry like the insurance industry begins to see mergers of the largest companies, it portends less competition and more price control between the remaining behemoths. Such mergers will be examined closely by the government for anti-trust violation. I will leave you with these quotes.”
“In an environment where the scales are already tipped, we are extremely concerned about the market imbalance this creates for medical practices and patients,” said Dr. Halee Fisher-Wright [of the MGMA]… “This will do nothing more than inflate healthcare premiums and decrease payments to physicians in favor of insurance companies and shareholders’ profits.” – Forbes
“One of the main goals of the Affordable Care Act was to restore competition in the health insurance sector,” said David Balto, a former policy director at the Federal Trade Commission who is now in private practice in Washington. “This consolidation will reverse these gains of the Affordable Care Act.” – Forbes
Will the Anthem-Cigna deal cost you money?
To find out what other changes could come with the health insurance mergers, click here.