Anthem, United eye big deals as game of thrones raises competition, transparency concerns

National insurers think they need to get bigger or risk losing out, so payer like United and Aetna are looking expand their core health plan businesses and take new services to market.

The country’s largest for-profit health insurers are circling each other.

Blue Cross Blue Shield giant Anthem has reportedly made a $45 billion bid for Cigna, the fifth-largest publicly traded insurer, while UnitedHealth Group is staking out an even larger bid to take over Aetna and several payers are courting Humana, according to a series of reports in the Wall Street Journal.

Profits in health insurance are effectively capped due to the Affordable Care Act’s medical cost ratios, so national insurers think they need to get bigger or risk losing out. So these large, diversifying insurers — United and Aetna having the most varied revenue streams — are looking expand their core health plan businesses and take new services to market. 

[Also: Humana puts itself up for sale, reports say]

“Debt is cheap and well-positioned health plans are evaluating the landscape for consolidation opportunities as a means to strengthen market position and preserve existing profit pools," said Oliver Wyman partners Terry Stone and Todd Van Tol in a recent presentation at America’s Health Insurance Plans Institute.

There are also the smaller, for-profit insurers focused on Medicaid managed care: Centene, Health Net, Molina and WellCare. “I think you’re going to see a massive shakeup in the Medicaid plan space,” said Ashraf Shehata, a partner in KPMG’s healthcare center of excellence.

Across the country, even among nonprofit health plans, mergers and acquisitions loom, said Shehata, who added that more for-profit conversions of nonprofit Blue Cross Blue Shield companies could be on the horizon.

[Also: Blue Shield of California stripped of tax-exempt status by state]

But will insurance consolidation translate into more leverage imposed on providers, employers and consumers? Will it benefit only the insurers and their shareholders? And will trade regulators in the Obama Administration or another administration approve a United takeover of Aetna, the largest insurer buying the third largest and having close to 70 million health plan customers right out of the gate?

Question like these are prompting consumer advocates to speak out.

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"Generally speaking, further consolidation in the health insurance industry is not a good thing for consumers, employers or medical providers," California insurance commissioner David Jones told the Los Angeles Times. "It means the potential for future price increases as a result of less competition. There is no requirement the insurers pass on the savings, and historically I don't think it has worked out that way.”

There is also skepticism that bigger insurers will be willing to make progress on the price transparency front, despite numerous initiatives among United, Aetna and others to encourage comparison shopping.

"There is a history of large organizations becoming less willing to disclose data on their prices, utilization, or outcomes, and using their market power to command higher prices,” David Lansky, CEO of the Pacific Business Group on Health, told the LA Times.

“As these mergers happen, what guarantees will the parties make to providing sufficient transparency into how services are priced, what quality is being achieved and where to go to get the best care at the best price?” Lansky said.

If insurers don’t make headway on those issues, they may run the risk of losing customers — employers like Boeing who can contract directly with health systems and individual health plan members and seniors in Medicare Advantage who can be drawn to provider-sponsored health plans.

Twitter: @AnthonyBrino