Anthem’s acquisition of Cigna is being called the first “merger of titans” by industry watchers.
The forces of consolidation are well under way and the merger was not totally unexpected—all of insurance is going through similar consolidation, according to Munzoor Shaikh, a director in West Monroe Partners' healthcare practice.
“Healthcare insurance business is not the best today in terms of return on capital,” Shaikh says. “We see this as a trend in consolidation toward an oligopoly system. The U.S. healthcare system is averse to a single payer system—monopoly—and we see an oligopoly as an alternative equilibrium point.”
John Santilli, partner, Access Market Intelligence, a company of thought leaders, innovators and advisers, agrees.
“The consolidation of the health insurers market has been inevitable as a result of the [Affordable Care Act (ACA)] as the companies seek to gain greater scale to capitalize on growing opportunities in the government and individual markets and reduce costs,” Santilli tells Managed Healthcare Executive. “The ACA has increased revenues for health insurers but has also increased profit margins as the movement toward pricing transparency has grown and funding for government plans has decreased.”
The employer-sponsored commercial segment is the strength of both Cigna and Anthem, according to Santilli. “However, each company focuses on different employers. Anthem’s focus is on local employers, with the majority of members located in the headquarter state of the employer. Cigna’s focus is on employers with employees spread across multiple states. Along with increased membership, the merger should help the new company with integration issues in multistate employer accounts.”