How will carrier consolidation impact group health insurance?

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Another day, another merger – at least, that’s how it seems. Speculation about big carrier consolidation is flying fast and furious lately, and the implications could be far-reaching.

Aetna and Humana are getting ready to tie the knot.

There’s a competitive advantage spurring them together. Currently, the giant in the Medicare Advantage market is UnitedHealthcare – but if Aetna acquires Humana, it would jump to the lead in one strategic move. “That was the strategic play that had Aetna interested in Humana,” said Tucker Sharp, global chief broking officer with Aon Health.

UnitedHealthcare has its eye on Aetna.

UnitedHealthcare could steal the dance, however, by acquiring Aetna before it makes the match. By doing so, it wouldn’t just circumvent the possibility that Aetna/Humana could outpace UnitedHealthcare – it would ascend to industry dominance.

“If UnitedHealth were to purchase Aetna, it would boast $189 billion in sales,” said Fortune magazine. “If the carriers were combined today, they would rank fifth on the Fortune 500, leapfrogging the likes of AT&T (No. 12), Ford Motor (No. 9), and Apple, the current No. 5.”

Anthem is still vying for Cigna, even after Cigna said no.

Meanwhile, Anthem is vying for Cigna with $47 billion on the table, Benefits Pro said, with a dash of social pressure for good measure. By making the offer public, they’re exerting pressure on Cigna’s board to accept. Cigna refused the offer, but Anthem isn’t taking no for an answer; they reiterated the offer Monday.

From five to three: what are the implications?

All this talk about mergers stems in part from the ACA, which “put tougher rules on the industry, demanding more covered services, better care and a ceiling on profits,” said Benefits Pro. As a result, “companies are racing to capture the more than 20 million customers who will buy coverage through the PPACA markets.”

A fair observation. On the other hand, there aren’t that many big insurance carriers to start with, and if they join forces, they stand to reshape the face of the industry. What would that look like? More importantly, what would it mean for the insured?

Doctors are worried that these mergers will bring ballooning costs.

“Some doctors are nervous,” CNN Money said. The American Academy of Family Physicians is concerned that these mergers would bear “an immediate and profound negative impact on the availability and affordability of health insurance for millions of consumers.”

Should the Big Five become the Big Three, they’d be able to raise premiums, exclude doctors and facilities from in-network plans and exert unfair leverage in rates negotiations – ultimately raising consumer costs and reducing options.

Not surprisingly, insurers see it differently.

Clare Krusing, director of communications for America’s Health Insurance Plans (of which all of the big five are members), said it’s not insurance mergers that raise costs, but mergers among hospitals and other care providers.

Either way, rising costs are about as hot as merger rumors.

Regardless of who’s correct on that count – physicians or insurers – Morningstar Analyst Vishnu Lekraj suggested that it’s up to insurers to make sure that concerns like the AAFP’s aren’t realized.

“The pricing environment is something that the insurers will have to focus on if they merge. Consumers cannot continue to pay at the rates they are growing,” Lekraj said. “Something has to give here.”

What would these mergers mean for the industry at large? Get the numbers from Fortune.

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