Consolidation in the Payer Market

Mergers and acquisitions in the US healthcare payer space has become the ‘talk of the town’ recently. The idea of consolidation was to build strength and boost growth by acquiring smaller companies. It is not a new concept, but has been happening for quite a long time in several industries. Some industries that have faced significant amount of consolidations include the Automobile and Passenger Aviation industries. A few recent examples in aviation industry acquisitions include Southwest Airlines – that has acquired Morris Airlines, ATA Airlines and AirTran Airlines; United Airlines that has merged with Continental Airlines and American Airlines acquiring US Airways.

Now, the consolidation fever seems to have affected the US healthcare industry too. As a result, several insurance companies have proposed their plans for merging themselves with other entities to expand base and improve business. Some of them succeeded in doing so. To learn more about the latest mergers and acquisitions happening in the Payer market, scroll down:

The Facts:
As we all know, the top five private health insurers in the US are undoubtedly, United Health Group, Aetna, Humana, Anthem and Cigna (in no particular order). The current news is that these five big insurance companies are competing among themselves to acquire each other. Here are some insights;

The UnitedHealth Group Mergers:
After acquiring several insurance companies including LifeMark Health Plans, Sierra Health Services, and Medicaid insurance company AmeriChoice, the group has announced in March 2015 that its subsidiary, OptumRx will acquire CatamaranRx.

The Aetna-Humana Merger:
Aetna’s acquisitions dated way back to the late 90’s and its mergers include U.S. Healthcare, NYLCare Health Plans, and Prudential HealthCare. After that time, Aetna has announced its merger plans only recently (Jul 3, 2015). It is planning to acquire Humana for $37 billion while the former will hold a maximum share of 74% of the company.

The Anthem-Cigna Merger:
After acquiring the Blue Cross and Blue Shield companies in Nevada, New Hampshire, Connecticut, Maine and Colorado, Anthem is now eyeing on Cigna. On May 28, it pressed Cigna to sign a deal for a $53.8 billion-merger after Cigna declined the previously proposed bid.

Pros and Cons:
• The mergers and acquisitions will sometimes hike up the healthcare costs and also bring down the number of choices available for consumers.
• There is also a greater chance for monopoly formations, which can be dealt only by the government’s Antitrust laws.
• The good part is that physician credentialing will be less when more mergers happen, the merged entities are fully absorbed into one another.
• Another interesting fact is that medical claims processing will get consolidated, so healthcare entities can benefit.

Overall, Providers and healthcare facilities are benefited by the consolidation in the Payer market. This way, they can keep their medical billing and collections running smoothly. But for the average US citizen, this could reduce the choices they have in selecting a Payer that has the plans that fits their needs.

Now the wait begins to see how the Dept. of Justice reacts to these mergers and/or proposed acquisitions.