Health Insurance Mergers & What it Means to Consumers

Top health insurance company Anthem agreed to take over Cigna for $48 billion in yet another major health insurance merger as of this writing. The Anthem-Cigna marriage follows Aetna’s agreement to buy Humana for $34 billion.

While subject to regulatory review the deals accelerate the rapid streamlining of the U.S. health insurance industry. After these mergers, the United States will have only three major health insurance companies.

Health insurers claim mergers happen due to the need for cost efficiency following implementation of the Affordable Care Act or “Obamacare”. But Anthem admits if the deal goes through, the new company will earn an estimated $115 Billion while insuring over 53 million consumers. The merger also increases Anthem’s per-share earnings by nearly 10% in the first year alone.

How Do Health Insurance Mergers Affect Consumers?

The past has proven that typically when insurance companies merge, premiums rise. The health insurers claim that widespread consolidation is necessary to increase efficiency, and that smaller companies can’t offer efficiency so it will be difficult for them to compete.

While the ACA initially left the understandable impression that health care would be more affordable, many observers wonder. A Los Angeles Times columnist predicts that Americans face a less friendly health insurance marketplace with fewer choices and higher rates. Scarier still, health insurance mergers compare to draconian mergers in the telephone and cable TV businesses.

Health insurance companies claim consolidation gives them stronger negotiating power for better rates and lower fees with hospitals and other health care providers, which should lower costs for the consumer. However, this does not ensure that consumers will receive the same savings as the insurance companies.

Are Health Insurer Mergers Important to Your Personal Injury Claim?

If you have a personal injury claim, anything your health insurance company pays towards accident related medical bills must be paid back whether you settle the case or win a court judgment in your personal injury case.

Whether or not you have actually read the health insurance policy between yourself, your employer, if any, and the health insurance company, they all include language saying they’ll pay health care costs. But if you’re injured in an accident caused by the negligence of another person, then any recovery you receive must include reimbursement to the health insurer for their payments.

This claim against your personal injury case due to the negligence of another person is called ‘third party liability’ which we have addressed in more detail elsewhere: LIENS ON PERSONAL INJURY CASES.

If they’re merging into fewer and larger entities for reason of efficiency there’s a serious question as to how much bargaining power you will have even thinking of negotiating down what your final payback to them will be.

Health Insurance Mergers & Consumers

When gasoline prices go up, the financial reports on the oil companies proclaim a happy economy. When gas prices go down the financial reports foresee gloom. So one has to wonder when financial reports announce:

Anthem also said the deal for Cigna, of Bloomfield, Conn., could generate nearly $2 billion in annual synergies, which generally refer to cost savings from eliminating overlap.

Wall Street Journal, July 25, 2015, p. B3

While Anthem has downplayed any negative effects on consumers caught up the mergers, other observers warn that more consumers could pay increasing amounts for their health plans despite existing services not necessarily being enhanced or expanded.

Sources:

Anthem Cigna Health Insurance Merger: What Acquisition Means for Consumers, International Business Times, 7/24/2015.

As Health Insurers Merge, Consumers Premiums are Likely to Rise, Los Angeles Times, 7/10/2015.

Anthem Clinches Deal to Buy Cigna, Wall Street Journal, 7/25/ 2015.

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