Merger mania alive and well in healthcare

November 1, 2005

The WellPoint Inc. and WellChoice Inc. deal is further proof that merger mania among major health insurers is alive and well.

NATIONAL REPORTS-The WellPoint Inc. and WellChoice Inc. deal is further proof that merger mania among major health insurers is alive and well.

"The consolidation of healthcare payers and managed care organizations has been happening for the last few years," according to John Christina, vice president, life sciences/healthcare for Celerant Consulting. "The consolidation issue will continue in the market as smaller payers will find that they can't compete on a cost issue with the larger healthcare payers such as WellPoint, UnitedHealth and Aetna."

There is a good chance that other Blues plans will be acquired in the coming four to five years to further consolidate the choices even more, according to Christina. "To a certain extent, this is following the banking consolidation in its economy of scale issues and competition. The biggest concern for consumers will still be their network of providers and how they provide healthcare through the consolidation."

Both WellPoint and WellChoice share a vision of improving healthcare, according to WellPoint spokesman James Kappel. "Together, we can make that vision a reality by continually developing innovative products that meet customers' needs, by enabling consumers to make better informed healthcare decisions, and by working collaboratively with hospitals and physicians to improve quality and safety," he says. "In doing so, we will help hold down the rising cost of healthcare. In addition, the expanded expertise in product design and development will result in a greater choice of product options for consumers."

The $6.5 billion deal "further strengthens WellPoint's position as a dominant player in the Blue Cross and Blue Shield community," says Robert S. Oscar, RPh, president of RxEOB. "This will further allow WellPoint to standardize industry practices and back-end systems, improving efficiency, lowering operating costs, increasing the number opportunities to measure and increase quality. This will also help WellPoint compete for the most valued national accounts from Los Angeles to New York City."

The WellPoint-WellChoice merger means that healthcare organizations have more leverage with the providers than they ever have had before, according to Christina. "Most of the Blues plans are finding it difficult to compete with the for-profit payers, and this cost issue is one of the biggest reasons for that," he says. "Consumers will have fewer choices in their area, and most likely they will burden more of the cost of care than in the past also."

WellPoint's move into the New York market is to "stay competitive with its largest rivals, Aetna and UnitedHealth, with a greater choice of products and services," Christina says. "The advantage for WellChoice is that it keeps the Blue Cross Blue Shield name but adds more products to its business lines. As health savings accounts become more prevalent, WellPoint will be better positioned to offer this product as large employers start moving that way."

In other M&A news, some analysts say that Health Net could be the next target for takeover. "There are a number of targets that are smaller health plans that can be taken over by larger payers," Christina says. "Health Net could be one of them, but that would be speculation on my part." A Health Net spokesperson told MHE that the company will not comment on speculation.