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How a Humana acquisition would reshape the market

Deal could create competition, influence how insurers deal with federal regulators

Should any of the "big four" health insurance companies acquire Humana, the deal would consolidate the market, benefit employers and potentially increase insurer's influence with federal regulators, reported Business Insurance.

Humana's most attractive asset most notably is its booming Medicare business. Nearly 7.5 million of its 14.2 million members were enrolled in individual or group-related Medicare plans as of March 31; that's more than double the combined number of Medicare enrollees at Aetna, Cigna and Anthem, noted BI.

Humana has built its Medicare business over the last few years--premiums and service fees from such products made up nearly 72 percent of the insurer's total revenue in 2014, compared to 25 percent for non-Medicare plans.

With baby boomers entering the Medicare market every day, an acquisition could create a more robust competitor to top Medicare Advantage insurers such as Health Care Services Corp. in the Medicare space, reported Crain's Chicago. 

Additionally, the sale of Humana to Aetna, Anthem, Cigna or UnitedHealth would be a "positive, scale-driven value proposition for employers," Noel Obourn, director of emerging markets at Buck Consultants at Xerox, told BI. "If the acquiring company is one that has a dominant share of the national commercial employer space, but a de minimus play in Medicare, then I'd say you have a capabilities merger that is probably going to be value-accretive to both marketplaces and not highly disruptive or negative for either."

With consolidation imminent, a Humana acquisition may give larger plans more clout when pushing back on Centers for Medicare & Medicaid Services (CMS) regulations and oversight, noted BI. Currently, many insurers find CMS disruptive to their businesses.

Another possible outcome of a Humana deal: Cost-effective startups focused on small geographic areas in order to remain competitive with the big-time players, added BI.

For more:
- here's the BI article
- read the Crain's piece

Related Articles:
Aetna poised to make an offer for Cigna, Humana
Humana still attractive acquisition target, but priced too high
Booming Medicare business could make Humana an acquisition target
Anthem may be ready to make an acquisition