2016 Health Insurer Merger Frenzy 101
commanding focus in the larger-employer health plan marketplace, specifically overseas. 15 Anthem and Cigna are the second and fifth largest revenue-producing health insurers, and the merger would generate a large impact in commercial health insurance, or health insurance provided to employers and consumers. 16 Although the merger still requires approval from federal regulators, the transaction is expected to close in 2016.17 Cigna’s CEO states that the two companies have “very complementary strengths” and that “the companies’ strongest markets are generally not in the same places.” 18 Anthem and Cigna claim their merger deal will improve the cost of insurance and produce a broad range of health insurance products and services. 19 The merger of Anthem and Cigna would knock UnitedHealth Group (UHG) to the second largest health insurance company by enrollment. 20 The idea that the five largest health insurance companies could shrink to just three mega-insurance companies has caused worry amongst consumers, providers, and the healthcare industry as a whole. 21 Given the potential global impact on the healthcare market, it is imperative these deals are critically evaluated. 22
A. Drivers of Insurance Consolidation
Everyone will need medical care at some point. What remains uncertain is what kind of care, when that care will be needed, or how much that care will cost. To further complicate the issue, health care is a non-transparent market. 23 Unlike a hair salon, a restaurant, or a car dealership, few providers post prices for treatment and even if they did, higher prices do not necessarily correlate with higher-quality care. 24 To help individuals prepare for their inevitable healthcare needs, the ACA
buy-cigna-for-48-billion-1437732331. 15. Id. 16. Id. 17. Japsen, supra note 6. 18. Mathews & Hoffman, supra note 14. 19. Id. 20. Japsen, supra note 6. UnitedHealth Group Inc. is the largest revenue-producing health insurer and has, so far, avoided the merger wave. Mathews & Hoffman, supra note 14. 21. Japsen, supra note 6. 22. Leemore S. Dafny, Evaluating the Impact of Health Insurance Industry Consolidation: Learning from Experience, COMMONWEALTH FUND (Nov. 20, 2015), http://www.commonwealthfund.org/publications/issue-briefs/2015/nov/evaluating- insurance-industry-consolidation. 23. Molly Gamble, How Much Should We Expect Healthcare to Mimic Other Industries?, BECKER’S HOSP. REV. (Aug. 13, 2013), http://www.beckershospitalreview.com/hospital- management-administration/how-much-should-we-expect-healthcare-to-mimic-other- industries.html. 24. Id.