Anthem to Acquire Cigna, The Impact on Providers

Anthem LogoAnthem announced that it has agreed to acquire Cigna in a $54 billion cash and stock transaction. The deal, expected to close in 2016, will leave the healthcare industry with only three major payers – Anthem, Aetna and UnitedHealthcare.  Aetna acquired Humana earlier this year for $37 billion. Combine, Anthem and Aetna will cover an estimated 86 million members. UnitedHealthcare has also been active with acquisitions this year buying Catamaran, a pharmacy-benefits manager and prescription provider for 12.8 billion.

What do this mean for healthcare?

The primary concern is too much power in just a handful of insurance companies. The risk of having bigger insurers with more influence could raise premiums and reduce network coverage plans. A recent AON Hewitt survey noted that 46%of large and midsize employers expect a negative impact from health insurer consolidation and only 21% saw it as good thing for costs.

Alternatively, the insurance industry argues that consolidation will have a positive impact. The new, larger insurer will be able to negotiate lower prices thus resulting in lower premiums for consumers.

Anthem CEO Joe Swedish said,  "this transaction better positions us to serve the evolving health care market with increased participation by individual consumers and growth in the government business and the need for solutions that advance affordability, choice and quality,"

Some doctors may decide to opt-out of the payer system altogether and adopt a new business model that has their patients paying them directly. One example would be a subscription model where the patient pays a flat fee monthly for unlimited visits.

Only time will tell how this will unfold. The Anthem deal is pending regulatory approval.