'; if(pArray.length >= 4) { i=2; } else if(pArray.length >= 3) { i=2; inline = ''; } else if(pArray.length >= 2) { i=1; inline = ''; } else if(pArray.length === 1) { i=0; inline = ''; } $('#librarydrawer_story_container script').each(function() { $(this).remove(); }); $(pArray[pArray.length - 1]).after(subscribeBox); $(pArray[i]).after(inline).after($('#librarydrawer_story_container')); $('#text-story').focus(function() { if ($(this).val() == 'EMAIL ADDRESS') { $(this).css({color: '#000000', backgroundColor: '#ffffff'}); $(this).val(''); } }); $('#text-story').blur(function() { var trim = $(this).val().replace(/[\s]/g, ''); if(trim === '') { $(this).val('EMAIL ADDRESS'); $(this).css({color: '#666666', backgroundColor: '#f8f8f8', border: '#666666 1px solid'}); } }); $('.content-subscribe .btn-submit').click(function() { var val = $('.content-subscribe .text').val(); if(val.search(/[a-z0-9!#$%&'*+\/=?^_`{|}~-]+(?:\.[a-z0-9!#$%&'*+\/=?^_`{|}~-]+)*@(?:[a-z0-9](?:[a-z0-9-]*[a-z0-9])?\.)+[a-z0-9](?:[a-z0-9-]*[a-z0-9])?/gi) === -1) { $('.content-subscribe .text').css('border', '#ff6600 1px solid'); $('.content-subscribe .text').focus(); return false; } return true; }); }); //-->

A glass-half-full view of health insurer consolidation


The recent rush of consolidation in the health insurance industry has triggered a host of analyses about what the trend means for healthcare providers, employers and consumers. But I've seen less written about the effect these mega-mergers will have on health insurance companies--the ones occupying the industry that stands to be fundamentally disrupted.

For the companies involved in the proposed deals--Aetna and Humana as well as Anthem and Cigna--the benefits are clear. All four insurers will be able to expand into geographical areas and markets that previously were untapped, and the combined companies will wield greater price negotiating power. It's a vital strategy in a post-Affordable Care Act industry that's focused more than ever on controlling costs.

Case in point: Each pair of companies said they're interested in pursuing their own standalone pharmacy benefit management ventures if their mergers pan out, a move that would increase value for their shareholders while allowing them to put increased pressure on drug-makers to keep costs down. (Pricey pharmaceuticals are a major reason why healthcare costs are once again on the upswing.)

And at least one health insurance executive not involved in the deals shares an optimistic view of industry consolidation.

"Frankly, I see it as opportunity," Dan Hilferty, CEO of Philadelphia-based Independence Health Group, told FierceHealthPayer in a recent interview.  

Independence Health Group has "never been reluctant to pursue unique partnerships" with other Blues or like-minded companies, he said, and with nearly $15 billion in revenue, it's also no stranger to scale.

For "companies like ours that are aggressively growing, aggressively diversifying our business and partnering both nationally and internationally, it's an incentive for us to find like-minded partners," Hilferty said.

Indeed, "regardless of the effect on the market, merger and acquisition activity among insurers is likely to continue," according to an Insurance Business America article, which adds that this is largely because provisions of the ACA encourage health insurers to cut down on administrative costs, a feat more easily accomplished through consolidation.

Some have argued, though, that it's less the ACA driving the recent mergers as it is the rush to expand into the lucrative Medicare business as well as insurers' natural response to provider consolidation.

Regardless of whether the merger madness will continue--and I think it will--there's still the question of how the current deals would reshape competition within the health insurance market. For example, while one analyst argues that the deal between Anthem and Cigna sets Anthem "in direct competition" against other Blues plans nationwide, Anthem CEO Joseph Swedish indicated on a recent conference call with investors that he isn't worried about any pushback from the Blue Cross Blue Shield Association. Not only will the company "remain Blue," but it also has reached out to the BCBSA to discuss the benefits of the merger and how to comply with its rules, he said.

And speaking of rules, you can bet that other insurers are going to watch very closely as state and federal authorities scrutinize the two blockbuster deals on the table. If one or both of the mergers fail to pass regulatory muster, it's possible this would have a chilling effect on consolidation within the industry--if only for a short time.

So what's the bottom line? As I've written previously, there's still so much that's uncertain, even after Aetna, Humana, Anthem and Cigna have ended weeks of speculation and announced their respective deals.

What we do know, however, is that the current wheeling and dealing will fundamentally alter the health insurance industry for years to come--and like with so many other seismic shifts in the business world and beyond, perhaps the best strategy is to embrace the inevitable change. - Leslie @HealthPayer