Largest Insurance Merger in History

Last Friday news was buzzing with the announcement that Cigna and Anthem will in fact be merging. The $54B deal won’t be finalized without Federal approval, but after long awaited negotiations an agreement has been met. Currently there are five major health insurance carriers, Aetna, Cigna, Anthem, United Healthcare, and Humana. Although three weeks ago Aetna acquired Humana bringing the large carrier count to four. Now this merger takes the count down to three.

Speculation as to why these carriers feel the need to merge has been a heightened topic, but a substantial reason has yet to presented itself. Dan Diamond who writes for Forbes said, “It’s a given that that super-sized insurers will have more market power to negotiate with other players in the health care industry. The CEO of Novatis has already warned that his company will have more problems exacting price increases for their drugs.” Cost is one of the large reasons that mergers may be taking place. Although, it is unsure whether this could help or harm consumers in the long run.

The carrier side says that they will be able to lower administrative costs which in turn will allow for lower premiums costs. The provider side believes that the merge will force more costs onto consumers. In an already limited industry why are we limiting our choices even further with these mergers. Wall Street has it’s own opinion reflected in last weeks trading dropping Cigna and Anthem by $3B. Not a huge hit to companies both worth $40B, but a clear message being sent by shareholders that they are unhappy with the changes taking place and are unsure if the Federal government will approve such changes.

What do you think of these mergers and what is happening to the healthcare industry? Read more from Dan Diamond on Forbes HERE

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