Latest carrier merger could offer employers new, innovative opportunities

As another insurer megamerger takes place, how will employer health plans fare with a shrinking field of providers?

Anthem on Friday announced its agreement to acquire Cigna for $54 billion, creating the health insurance industry's biggest company by enrollment, and ending a long line of deal making in the health care sector.

“Fiscal concerns remain the dominant driving force among most health plan sponsors,” said Edward A. Kaplan, national health practice leader at Segal said of the merger. “They will value solutions that lower health plan cost trends and offer quality health care services and networks.”

Also see: Employers divided on Aetna, Humana merger

“Large employers will have concerns about the merger between Anthem and Cigna because employers will be left with only three major insurers who can support large multi-state employers on a nationwide basis,” adds Brian Marcotte, president and CEO of the National Business Group on Health.

“Many large employers offer more than one national plan to provide employees with choice, cover provider network gaps and to have insurers compete on performance, strategy, cost management and innovation. One less option means less competition in all areas,” he said. 

In agreement, Kaplan says he hopes that these recently announced mergers promise of better leverage and lower costs come to fruition, however many of his clients are weary of the ‘bigger is better’ mantra.

“Plan sponsors are concerned they will have less choice and less flexible and responsive business partners without healthy market competition, and the cost advantages of these larger entities may not be realized by those ultimately paying for the care,” he added.

Also see: Consolidation makes room for new players, ideas

But it isn’t all doom and gloom, as Marcotte believes the merger could provide some positives for negotiation capabilities.

“The merger may rebalance provider negotiation leverage in Anthem’s favor after years of provider consolidation that has gone pretty much under the radar screen,” Marcotte says. “And employers will want to see the additional negotiating leverage, coupled with efficiencies of scale, translate into better pricing for them and employee plan participants.”

Tucker Sharp, Aon Hewitt’s global chief broking officer, says employers and employees shouldn’t expect any major reductions in health care offerings.

“During the last several years, employers and health care exchanges have already been adding regional and local health plans into the mix alongside the national health carriers,” he notes. “The combination of national and regional carriers, as well as new employer options emerging as a result of significant merger activity within the health care provider (e.g., hospital and physician group) space, should continue to provide employers and employees meaningful choice during the next several years.”

Sharp calls the merger complementary, and that it “combines Anthem’s Blue Cross and Blue Shield footprint in 14 states and its strong presence in offering Medicaid plans with Cigna’s commercial strength nationally and globally, along with its broad supplemental portfolio.”

He does suggest a few short- and long-term thoughts employers should consider:

• Anticipated closing: While there are inevitable implications tied to this merger, as is the case with the Aetna-Humana merger, it could take six months to more than a year to secure a final approval from the Department of Justice, Federal Trade Commission and other regulatory agencies. Therefore both deals are not expected to close before the last half of 2016.
• Employer short-term actions: Employers do not need to make any immediate decisions on keeping or eliminating these carriers as part of their short-term health strategies. Clients evaluating insurance carriers should continue to view Anthem and Cigna, as well as Aetna and Humana as separate, independent firms. Even if these deals are approved, it is unlikely we will see any changes in networks and plans in the near term.
• Longer-term actions: The health care ecosystem will continue to shift as these mergers are approved. This shift provides tremendous opportunity across the areas of innovation, network configuration, reimbursement methodologies and program designs.

Friday’s announcement follows on the heels of Aetna and Humana’s $37-billion deal reached earlier this month, along with Health Net’s deal to be acquired by Medicaid insurer Centene for $6.8 billion.