Health Insurers Consolidating at Record Pace

The Wall Street Journal

The two biggest U.S. health insurers by revenue, UnitedHealth Group Inc. and Anthem Inc., are seeking to buy smaller rivals in a merger scramble aimed at cutting costs as the companies cope with the federal health-care overhaul.

UnitedHealth made a preliminary takeover approach to Aetna Inc. in the last few days. Simultaneously, Aetna has been eyeing Humana Inc., which is exploring a sale. UnitedHealth revenue last year totaled $130.5 billion, including its health-services arm, Optum, while Aetna’s was $58 billion.

Meanwhile, Anthem and Cigna Corp. have been in discussions about a deal, though Cigna has rebuffed Anthem’s advances. Cigna’s revenue last year totaled $34.9 billion, while Anthem’s was $73.9 billion.

The jockeying comes as more of the health insurers business is tied to growing government programs and exchanges related to the Affordable Care Act. Traditional employer insurance, meantime, isn’t a growth business. These companies now are trying to lower their expenses and battle for market share.

Break Away from the Static

There is no doubt that these insurers will use their new size to negotiate with physicians and hospitals for more competitive rates.  Radiology groups should consider this now and begin developing a strategy to deal with these larger payors.  One or all of these combinations would create even bigger players in the commercial health-insurance business, with strong positions among individual, small-business and big-employer clients.

Health Check

 

The big health insurers have long been expected by analysts to turn to mergers that will give them the scale to better compete. In industries like health insurance where there are only a limited number of combinations regulators will allow, mergers are often like a game of musical chairs, with companies rushing to strike deals that will keep them from being left behind rivals.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA
President/CEO