Health Care Law Spurs Merger Talks for Insurers
JUNE 22, 2015

President Obama signed the Affordable Care Act more than five years ago. At the time, members of the health care industry — hospitals, doctors and insurers — were anxious about what it would do to the business. Everyone had an opinion, but nobody knew for sure.

We’re now beginning to see the answer: consolidation on a huge scale.

Just in the last couple of weeks, the nation’s five largest health insurers began a round robin of merger talks — some still semiprivate, others now out in the open — that could whittle their number to three. Anthem made a bid for Cigna; Aetna approached Humana; and the UnitedHealth Group made overtures to Aetna.

Those potential deals come on the heels of a spate of hospital mergers over the last couple of years — and speculation about another round of such deals.

All of this deal-making is largely the result of the Affordable Care Act, which in effect constrains the amount of profit hospitals and insurers can generate, leading both to seek additional scale in hopes of generating higher margins by squeezing additional savings out of a broader customer base.

To some degree, consolidation among hospitals and insurers was part of the design of the law, which sought to provide health care for the uninsured and help push down health care costs. That led health care companies to find efficiencies. That, in turn, meant deals.

In 2011, the Aetna chief executive, Mark T. Bertolini, responded matter-of-factly to an analyst’s question about possible mergers: “I expect and we expect that consolidation will continue going forward here as health reform shakes out winners and losers in the process.”

The question, of course, remains whether the savings that might come from consolidation will trickle down to the consumer or will simply wind up in the pocket of shareholders.

The prevailing view is not promising.

“Seldom does consolidation result in reduced costs for consumers. Bigger insurance companies mean increased leverage and unfair power over negotiating rates with hospitals and physicians,” the American Academy of Family Physicians wrote in a letter earlier this month to the Federal Trade Commission, urging that it block the latest series of deals. “More often than not, consolidation increases costs and reduces options for consumers, and we believe this would hold true in the health insurance market.”