Insurers in Calif., Other States Increasingly Considering Mergers
Large insurers in California and across the U.S. are increasingly looking for merger opportunities as they compete for customers through the Affordable Care Act's exchanges, as well as Medicaid and Medicare, the Los Angeles Times reports.
However, experts say such moves might leave consumers and employers with fewer choices for health insurance and higher medical costs (Terhune, Los Angeles Times, 6/17).
Stakeholders have reported that Anthem, Aetna and Cigna all are considering mergers with Humana (Terhune, Los Angeles Times, 6/15).
This week, Anthem made an offer for Cigna, which has the fifth-highest enrollment of all health insurers nationwide, according to the Times.
Meanwhile, UnitedHealth Group made a bid for Aetna, the third-largest insurer by enrollment.
Consolidations in Calif.
In California, Anthem Blue Cross, Blue Shield of California and Kaiser Permanente accounted for 78% of the employer and individual insurance markets in 2012, data from Citigroup show. Aetna, Cigna and UnitedHealth held 13% of the market.
In 2012, Anthem acquired Amerigroup, a Medicaid insurer that runs Blue Cross plans in California and other states.
During a conference in May, Anthem CFO Wayne DeVeydt said, "I like the pricing environment a lot, and we have a lot of capacity to work with to do a cash transaction of meaningful size -- and it would be transformative."
Experts say the "merger frenzy" could result in the three largest insurers -- Aetna, Anthem and UnitedHealth -- becoming even bigger presences in the market (Los Angeles Times, 6/17).
Ana Gupte, a health care analyst at Leerink Partners, said, "Like many industries, we think the managed care industry will evolve to a Big 3" (Los Angeles Times, 6/15).
In California, consolidations among larger companies could shift attention to smaller insurers, such as Woodland Hills-based Health Net and Long Beach-based Molina Healthcare, according to the Times.
However, observers note that while larger insurers could negotiate better terms with providers and drugmakers, such consolidation also could reduce competition in the insurance market.
David Gruber, director of health care research at Alvarez and Marsal, said, "Consolidation invariably leads to higher costs to consumers. We've seen it in medical devices, pharmaceuticals, and hospitals and health systems."
Jeffrey Loo, a health care equity analyst at S&P Capital IQ, agreed with Gruber, saying, "I don't see these deals being beneficial to individual consumers" (Los Angeles Times, 6/17).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.