Two giant health care companies, Aetna and Humana, just announced a spectacular merger. It will take time for the dust to settle, but already the deal raises a number of considerations, pro and con. At the end of the day, depending on whose perspective is voiced, the new group is a big winner or a big loser. It remains to be seen, as the merger won’t even be completed until 2016. Time will tell.
Money is definitely a factor in the decision, as each company has more than $100 billion in annual revenue. Aetna is the third largest U.S. health insurer, and Humana ranks No. 4. Together, they would sit atop the industry, according to the Wall Street Journal.
The agreement “would bolster Aetna’s presence in the state- and federally funded Medicaid program and Tricare coverage for military personnel and their families,” according to the Associated Press. And news outlet Reuters has pointed out that the deal between Aetna and Humana “would nearly triple Aetna's Medicare Advantage business.” The merger hopes to avoid too much anti-trust scrutiny from the federal government, typical in big deals like this one.
Barron’s reports that with investors, the fear is that the White House may be wary of approving the deal, which would shrink the number of major health insurers to four from five, especially amid expectations that Anthem may reach a deal to buy Cigna after being previously turned away. The current thinking is that both deals—assuming Anthem and Cigna reach an agreement—would be reviewed in tandem by anti-trust regulators.
Health insurance is a politically charged issue—the Supreme Court recently upheld the Patient Protection and Affordable Care Act's subsidies and many insurers are seeking large rate increases to offset higher-than-expected claims. PPACA is President Obama’s legacy legislation, and anything that potentially compromises its success may not be viewed favorably by the administration.
From the sidelines, here are a few positives and negatives:
POSITIVE: Medical providers should, over time, have easier access to patient medical records and billing options.
NEGATIVE: It will take years to completely merge two systems, which will lead to initial frustration from providers and patients. Accessing patient records is a legal nightmare, and HIPAA regs will need to be closely followed post-merger.
POSITIVE: The conglomerate effect should reduce pressures to bring down the cost of care.
NEGATIVE: Reducing the amount of duplicated medical procedures and billing codes between both carriers will take time to sort out—who has the better mousetrap?
POSITIVE: Consolidation in the health care space is good, as long as overall competition remains strong.
NEGATIVE: Fewer players in the market means fewer options for consumers and employers, which may lead to increased costs. Will premiums and cost of delivery take a hit?
POSITIVE: Larger presence in the industry puts other carriers on notice that no one is safe from being stalked, so every company needs to up their game when it comes to costs and care.
NEGATIVE: Money spent on the merger needs to be recouped. Who suffers? Employers, consumers, patients, medical providers? Somebody has to pay up.
POSITIVE: Health care gets to have greater coverage in more areas with less overlap.
NEGATIVE: Physicians and medical facilities may opt out due to company cutbacks for payments to make up for spending money on the merger. This means fewer docs in the box, and fewer treatment options for consumers.
It’s a brave new world, according to the Supreme Court and everyone else with an opinion that counts. Will the merger between Aetna and Humana survive? Possibly … and probably. There’s too much at stake for each organization for it not to move forward. Let’s hope private pay doesn’t eventually become public payout.