Bonneville Phoenix Network
 KTAR News
 Arizona Sports
92.3 FM KTAR



Updated Jul 24, 2015 - 12:42 pm

Why the 2010 health care law led to insurance merger mania

NEW YORK (AP) — The health care overhaul law has reshaped the health insurance business, and one consequence is more than $100 billion in mergers and acquisitions over the last few years.

Anthem Inc.’s purchase of Cigna Corp. and Aetna Inc.’s acquisition of Humana Inc., both announced this month, are worth more than $80 billion combined. The companies snapped up competitors in smaller, but still hefty, deals for years before that.

With millions of people getting health insurance coverage since 2010, health insurers can buy one another faster than they can sign up new customers. The deals let them spread out their costs and diversify their business by expanding into new markets. Many of the purchases have been designed to bulk up their Medicaid and Medicare Advantage businesses because both of those programs keep growing.


The health care law let states expand Medicaid, which serves people who are poor or disabled, to millions of people, and states have turned to health insurers to manage the expanded populations. Medicare Advantage plans are privately run versions of the federal government’s coverage program for people who are over 65 or disabled, and their rolls were growing long before the health care overhaul.

The consolidation reached a possible apex this month. If all of the recent deals go through, Anthem, Aetna and UnitedHealth Group Inc. would each have more than $100 billion in annual revenue.

The bigger the companies get, the more power they have to negotiate prices with health care providers and drug companies. While UnitedHealth hasn’t bought another health insurer recently, on Thursday it finished its $12 billion purchase of prescription drug benefit manager Catamaran.


The health care law, officially called the Patient Protection and Affordable Care Act, was enacted in March 2010 and was altered but upheld by a major Supreme Court decision in 2012 and upheld in another case this June. Over time it expanded coverage to millions of people through the Medicaid expansion, state-based public health insurance exchanges and other means. It also created new benefit and coverage rules and required insurers to spend more of their premium dollars on coverage.

The law also barred health insurers from excluding patients because of health problems and created including an industry-wide tax that is non-deductible.


Other, smaller deals have been focused on technology. With so many more patients entering the system, insurers looked for ways to become more efficient and save money, and demand for technology services rose as hospitals and doctors and other entities in the health care system were also seeing more patients.

The effects on the health insurance industry are only part of the law’s impact, as it brought on waves of deals between drug companies, medical device makers and prescription benefit managers as they reacted to new pressures to keep their costs down. Health care companies spent some $438 billion on mergers and acquisitions in 2014 alone.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


comments powered by Disqus