For years, there has been the "Big Five" of health insurance companies, but a change to the "Big Three" of Anthem-Cigna, UnitedHealth Group, and Aetna-Humana appears to be closer to reality. The idea that Aetna would acquire Humana or that Anthem would acquire Cigna seemed a more remote possibility earlier this year. But rumblings began that Aetna was looking to expand its portfolio through the acquisition of either Cigna or Humana, sparking a torrent of M&A rumors and proposals. And this week, another piece of the puzzle took shape: Anthem reached an agreement to acquire Cigna for $54 billion. This development follows an agreement announced in June for Aetna to acquire Humana.
These proposed acquisitions, if approved, will change the competitive landscape of the health insurance industry on an unprecedented national scale. Anthem is poised to become the nation's largest insurer in terms of enrollment, leaping UnitedHealth Group. Both Aetna and Anthem are poised to gain a bigger piece of the Medicare Advantage market, a key business line as baby boomers age into Medicare.
UnitedHealth Group, which currently has the most enrollment nationwide, appears content to sit back and watch everything unfold, at least for the moment. Though UnitedHealth made a brief and ill-fated play for Aetna, the carrier has focused on enhancing its pharmacy benefits subsidiary Optum. However, don?t rule out the possibility that UnitedHealth will get into the merger game down the road.
Aetna-Humana and Anthem-Cigna will face regulatory review on a national and state level. States have already announced their intentions to scrutinize the Aetna-Humana deal, though playing second fiddle to the Federal Trade Commission. The Anthem-Cigna deal will likely face at least as much regulatory scrutiny as the Humana acquisition by Aetna. These insurers may have to divest of some business lines to satisfy regulatory agencies, which highlights the potential for this consolidation to reduce competition in certain markets and states. Other questions may arise concerning the clout and control Aetna and Anthem could exert when negotiating with physicians and health systems. Despite those concerns, mid-2016 will likely be the dawn of the new "Big Three," shaping up for a showdown of epic proportions in 2017.
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