The ACA has set off a wave of M&A activity within healthcare. Hospital networks have been consolidating, resulting in dominant regional and national players. Now, with the uncertainty of King v. Burwell comfortably in the past, some of the nation’s largest payers are also considering the potential benefits of merging with competitors. M&A activity in the space suggests the importance of scale and the allure of government business, especially the administration of Medicare Advantage plans. High-profile examples in recent weeks include Aetna’s acquisition of Humana for $37B and today’s news that Anthem is buying Cigna for $54B, provide evidence that in size there is security.
Increased interest in consolidation within the payer space raises questions about underlying motivations. Some skeptics might argue it’s about insurance companies trying to increase their negotiating power and drive higher profits. These goals are certainly important in the short-term, but they only partially capture what payers hope to achieve. (more…)