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Big insurers could get even bigger

June 16, 2015
by Julie Miller, Editor in Chief
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Behavioral health providers need to take note of the speculation about merger-and-acquisition deals now cropping up in commercial health insurance. What should be most concerning to providers is the potential for these insurance giants to gain even greater market clout.

Bigger organizations often have the luxury of a “take it or leave it” position in rate negotiations. They also have the habit of using a template for many of their dealings with providers, not taking the unique culture of behavioral health into account.

Who's buying whom

Reportedly, Aetna is eyeballing Humana for acquisition. At the same time, Aetna itself is reportedly being approached by megainsurer UnitedHealth about a takeover that could be valued at more than $40 billion, according to newsfeed Seeking Alpha. One deal that didn’t come to fruition was the recent pitch—there might have been more than one—by Anthem to buy Cigna for $45 billion.

Obviously, the organizations would be looking for economies of scale, but we’re already talking about huge companies. These are the biggest of the big in commercial insurance.

 

People Covered by Medical Policies

Anthem                             37.5 million

UnitedHealth                     36.8 million

Aetna                                23.1 million

Humana                            13.8 million

Cigna                                 13.7 million

 

If Aetna buys Humana, a merger there would be significant. However, if the speculation is true and UnitedHealth is looking at Aetna, the result could be an insurer with something like 74 million people covered.

Although, realize that it’s a bit misleading to define the company simply by “membership” because UnitedHealth has so many subsidiaries covering people for specialty services (such as OptumHealth). In terms of the money it manages, however, in 2014, UnitedHealth handled more than $165 billion in aggregate healthcare spending.

Why you need to care

You need to worry about any megamerger in commercial insurance. The commercial plans are increasingly taking over the fee-for-service Medicaid lives in many states, and they are the sole source of non-Medicaid health policies for the millions of folks who shop on the insurance exchanges that came about under the Affordable Care Act (ACA).

Commercial insurance has clearly grown beyond just the traditional employer-sponsored segment. It’s the dominant mechanism for Americans to finance their health services today with no sign of letting up in the future. Huge companies can have huge impact on providers, even in markets where the provider has traditionally had the upper hand.

 

Source: SEC 10-k filings, 2014; Mark Farrah Associates

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Julie Miller

Editor in Chief

Julie Miller

@editor_JMiller

Julie Miller has more than 14 years of experience observing, analyzing and reporting on various...