Becker's Spine Review

53 PRACTICE MANAGEMENT SPINE DEVICE & INNOVATION HEALTHCARE REFORM Anthem to Buy Cigna — And Then There Were Three: 7 Key Points By Ayla Ellison and Molly Gamble A nthem announced that it has reached terms to buy Cigna. Earlier this month, Aetna inked a deal to acquire Humana. ese two mergers involve four of the five largest payers in the nation and will greatly shi the health- care landscape. is consolidation at the very core of the healthcare in- dustry may have a very negative impact on employer healthcare costs and the costs of insurance coverage. It greatly strengthens the hands of the payers vis a vis employers and vis a vis provid- ers. It is likely to provide payers with greater leverage and market power with each audience. Here are seven key points about the payer consolidation. 1. In the United States, the big five payers have traditionally been Aetna, Blue Cross Blue Shield — which includes 36 companies, the largest being Anthem — Cigna, Hu- mana and UnitedHealthcare. Whether looking at revenue, market share or presence in a specific area such as Medicare Advantage, each of these insurers is a major to dominant force in the industry. 2. With Aetna acquiring Humana and a deal in the works for Anthem to takeover Cigna, the landscape drasti- cally changes, and there will be three key payers instead of five. 3. While not yet a single-payer system, consolidation is causing the system to look more like a small oligarchy. It may actually lead some parties who hated the idea of Medicare as a single payer to desire this. It may also over time lead to the proliferation of new payers. 4. e consolidation is quite frighten- ing for smaller providers of all sorts as it leaves them with fewer access points for patients. e leverage of providers with payers will take a significant hit. 5. e consolidation is unlikely to re- duce employer costs or really bend the cost curve as such fewer payers will also mean fewer options for employ- ers and more leverage with employers. A recent AON Hewitt survey noted that 46 percent of large and midsize employers expect a negative impact from health insurer consolidation and only 21 percent saw it as good thing for costs. As the number of insur- ers shrinks from five to three, those payers will likely have more leverage on both sides of the equation — with employers and providers. Employers who are large enough may resort to trying to work around the payers. 6. Anthem is reportedly offering more than $48 billion for Cigna. Cigna re- jected Anthem's offer of $47.5 billion — $184 a share — in June, calling it "inadequate and not in the best inter- ests of Cigna's shareholders." Cigna shares closed Wednesday at $151.13, a market value of about $39 billion, al- though shares rose about 8 percent in aer-hours trading following reports of the impending deal. In the other deal, Aetna agreed to buy Humana for $34 billion, $230.11 a share. 7. e CEOs of what would be the remaining big three — Mark Bertolini (Aetna), Joseph Swedish (Anthem) and Stephen Hemsley (UnitedHealth) — are highly regarded. Decisions about leadership can make or break a potential agreement. For instance, talks between Anthem and Cigna started last summer but broke down over issues about who would run the combined company, the Wall Street Journal reported. n

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