In the News…
Is Obamacare creating wealthy healthcare insurers and triggering consolidation of the market? Now that SCOTUS has made its ruling and upheld for a second time attacks on the Affordable Care Act, industry insurers are again assured it is here to stay. A key position will be government exchange business.
Big news last week in mergers, the LA Times reporting Health Net Inc. agreed to be bought by Medicaid insurer Centene Corp. for $6.8 billion. Reporter Chad Terhume sites, the big health insurers are “riding high on Wall Street and flush with cash and have been on the prowl for deals. Atop the shopping list are companies that boost their government business.” And previously, the LA Times reported, “Health insurer Anthem Inc. pressed ahead with its pursuit of a $54-billion merger with Cigna Corp. despite a spurned bid and increasing concerns about industry consolidation.”
Hartford Eyewitness News is reporting “Aetna aims to spend about $35 billion to buy rival Humana and become the latest health insurer bulking up on government business as the industry adjusts to the federal health care overhaul.” The new company would be one of the largest carriers covering more than 33 million people. They will base in Hartford under Aetna Chairman and CEO Mark Bertolini.
The Economist is asking Better Together? Like hospital operators, health insurers in America are seeking to merge. The largest insurers by revenue are UnitedHealth, Anthem, Aetna, Humana, and Cigna. “The largest insurer, UnitedHealth, has approached the number three, Aetna. The second-largest, Anthem, is trying to buy the number five, Cigna—which on June 21st rejected Anthem’s $47.5 billion bid. And the number four, Humana, has been looking at selling itself to either Aetna or Cigna.”
With all the mergers and acquisitions taking place of course the DOJ is keeping a close eye on the activities. Reporting for the WSJ, Kendall and Mathews say the “Justice Department is gearing up for an exacting look at any proposed mergers among the nation’s top health-insurance companies, amid questions inside and outside the department about whether industry consolidation could suppress competition.” Read their article, DOJ Girds for Strict Review of Any Health-Insurer Mergers. The Justice Department has commented on these mergers raising antitrust concerns.
Five years after the signing of the Affordable Care Act, Andrew Ross Sorkin, financial columnist for The NY Times and a co-anchor of CNBC’s Squawk Box, writes on its spurring of merger talks for insurers. “All of this deal-making is largely the result of the Affordable Care Act, which in effect constrains the amount of profit hospitals and insurers can generate, leading both to seek additional scale in hopes of generating higher margins by squeezing additional savings out of a broader customer base.” Will the consolidations benefit the consumer? Not likely he argues.