Mega Merger – Good or Bad?
billion…with a “B”…announced in just the last 2 months and involving four of the nation’s five largest health insurers.
The deals likely won’t close until 2016, at the earliest, because business combinations of this size are subject to significant regulatory scrutiny. They will have to be approved by both state insurance commissioners and the federal government whose reviews will have the public interest and antitrust concerns in mind.
What does this all mean for you? Well, it depends.
Business combinations between companies of this size have the potential to stifle competition and make it easier to raise customers’ rates. But they also have the potential to bring about significant cost savings which, in theory, can be passed on to customers in the form of lower rates. (Anthem believes its combination with Cigna would yield over $2 billion of cost savings annually while Aetna estimates its combination with Humana will yield over $1 billion. Again that’s with a “B”!) Will the industry behemoths use their new found power for good or evil? Only time will tell.
The impact on customers also depends in large part of what the deals look like after the government is done scrutinizing them. As part of the vetting and review process, there could be significant alterations to the structure of the proposed deals. The companies may have to make various concessions to the government in order to gain approval, such as divestitures of business in overlapping geographic areas where market share is too great.
Approval of the deals could also bring forth a domino effect in the health insurance industry and in the healthcare industry in general. It could mean further consolidation in the industries as other insurers consolidate to stay relevant or as other providers consolidate in attempt to level the bargaining power on each side of the table.
Stay tuned. We’re certain to hear much more about these transactions in the coming months.
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Shawn Gillon, CPA 732-828-1614 [email protected]  |
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The information contained herein is not necessarily all inclusive, does not constitute legal or any other advice, and should not be relied upon without first consulting with appropriate qualified professionals.
