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Big Insurers Call Off Mergers

Big Insurers Call Off Mergers

In July of 2015, just weeks apart, four of the top five insurance companies in the nation announced that they would be merging with one of their big competitors: Aetna made an offer to acquire Humana for $37 billion and, in an even bigger deal, Anthem offered to purchase rival Cigna for $48 billion. Now, just a year-and-a-half later, following two adverse court decisions, both of those deals are dead.

On January 23, a federal judge ruled against the proposed merger between Aetna and Humana, saying that “The court is unpersuaded that the efficiencies generated by the merger will be sufficient to mitigate the anticompetitive effects for consumers in the challenged markets” (source: The New York Times). Two weeks later, a different federal judge blocked the Anthem-Cigna merger in what the Acting Assistant Attorney General Brent Snyder called “a victory for American consumers” (source: The Justice Department). He went on to say that the “merger would have stifled competition, harming consumers by increasing health insurance prices and slowing innovation aimed at lowering the costs of healthcare.”

In both cases, experts expected an appeal, but that didn’t happen. On Valentine’s Day, both couples announced that they were breaking up; it appears they won’t be appealing the court decisions.

While the giant mergers are no more, it’s likely that insurance companies will continue to seek ways to join forces. Doing so gives them greater negotiating power with doctors and hospitals, which in turn could help to keep costs down. One example is a joint venture between Aetna and Allina Health System in the Twin Cities. According to Minnesota’s Star Tribune, “Minneapolis-based Allina is one of the largest operators of hospitals and clinics in Minnesota,” and the new health plan will help to increase competition in a market that “has long been dominated by nonprofits.”

What the administration will say about these new entities remains to be seen, but we do have a President who loves to make deals… For brokers, it’s important to keep an eye not only on the legal and regulatory changes that will certainly be happening in 2017 but also on the market players. We’re almost certain to see some companies enter the group, individual, and Medicare markets, others make a decision to leave, and former foes team up to create new options for consumers.

The good news is that AHCP currently works with a number of national and regional plans and will be able to help you find the best solutions for your clients. It should be an interesting year.

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