Health insurer Aetna—the second largest commercial payer—recently announced that it has agreed to acquire rival Humana for $37 billion in cash and stock. The deal would join two of the biggest insurers in the country and bring in an estimated revenue of $115 billion this year, according to the New York Times.
Industry experts are saying this has signaled the start of an insurer consolidation trend. So what does the industry need to know in order to prepare?
David Chernof, MSW, LCSW, MBA, vice president of quality assurance and standards, Bridgeway Behavioral Health, and a Behavioral Healthcare editorial advisor, says he sees two upsides to the acquisition.
“This will ultimately reduce the amount of work an agency has to do to maintain their status with insurance companies—fewer companies should mean fewer networks to keep updated,” Chernof says. “Of course, the merging of their systems—credentialing and networking—will take time, but will lead to hopefully a reduction in work.”
Another positive, he says, is that if there are panels a provider can’t get on, like Cigna for example, and the organization merges with another that the provider is already a part of, then the provider could be absorbed into the newly merged panel.
“The largest downside that I see at the moment will be the potential reduction in payment rates due to the decrease in commercial insurance competition,” Chernof adds. "Of course, if the provider agencies grow large enough, there can be a credible discussion about rates, with the smaller agencies potentially suffering financial distress because of the mergers."
Insurer product lines
Dexter Braff, MBA, president, The Braff Group, says that while there has been chatter about synergies and efficiencies, it’s hard to imagine that there’s a lot of cost to be taken out of two $50 billion dollar insurers that are already scaled to begin with. But a rebalancing of product lines is a different story.
“With the deal, Aetna increases its access to Medicare Advantage patients by more than 250 percent, and with Aetna earning proportionately more revenues per enrollee in such programs versus its commercial products--not to mention the expected growth of Medicare Advantage plans--the deal makes sense,” he says.
Braff says the looming questions are whether or not the deal can get past anti-trust regulators, and if it does, whether it will give the insurers even more leverage to squeeze providers for price concessions.
“Our guess is ‘yes’ to the first, and ‘absolutely yes’ to the second,” he says. “We’ll see.”