Insurance consolidation drives vendor concern

Anthem plans to acquire Cigna for $48.3 billion; Aetna announces plans to purchase Humana for $37 billion. Is this good news or bad? While market consolidation can improve efficiencies and drive competition that benefits vendors and consumers, too much consolidation can lead to disaster for everyone

History is rife with examples of over-consolidation and virtual monopolies gone bad, but we only need to look to Univita Health in Florida for a recent example. Univita Health gained control of the entire Florida Medicaid home-care market a year ago. On July 28th the Florida Agency for Health Care Administration pulled all of their HMO contracts. The AHCA didn’t comment on why the contracts were pulled, nor has Univita. However, “whether instigated by the plans, by Medicaid officials who were tired of complaints, or the company itself deciding it could not make ends meet”, as outlined in Univita Health Losing Medicad Contracts by Carol Gentry of Health News Florida, it is clear that this virtual monopoly benefited no one, least of all Florida patients.

In this and other examples it is clear that when choice is eliminated, despite best efforts, accountability is eliminated. Without accountability, as enforced by consumer choice, service and value decline.

The proposed acquisitions by Anthem and Aetna would effectively leave the market with 3 major insurance players. My inner economist wants to believe that efficiencies will occur, spurring increased competition between insurance providers that produce better products and services at lower costs. However, the pragmatist and historian in me know that lower rates and increased vendor competition are on the horizon.

How would these acquisitions impact your company and what are you doing to prepare?