When President Barack Obama enacted the health reform law, he probably wasn’t thinking much about the insurance industry. But two companies smelled blood in the water, and when they entered into a $5.6 billion deal, the Aetna-Coventry Health Care merger made Aetna, the third-largest U.S. health insurance company, even bigger.
The deal will give Aetna a huge boost in Medicare and Medicaid customers, including poor elderly people on both programs, and in the number of people who buy insurance on their own or get coverage from small businesses. Aetna stands to gain five million new customers when the merger is complete, and even more in the near future.
"You've got an arms race going on in health care," said Robert Laszewski, a healthcare consultant and president of Health Policy and Strategy Associates in Alexandria, Va.
The U.S. presidential election was a “consideration but not a major factor” in Aetna’s decision to buy Coventry Health Care, Aetna CEO Mark Bertolini told CNBC’s “Squawk Box” on Friday, as reported by Justin Menza.
And this isn’t going to be the last of the big mergers. Laszewski said that health insurance companies, hospitals and other players are merging into bigger entities in hopes of reducing costs and grabbing larger shares of the markets “as they are reshaped by health care reform.”
But don’t expect your premiums to go down, he added.
The health insurance industry is undergoing a transformation as a result of the health care reform law, which the Supreme Court upheld in June. The healthcare companies “that come out ahead will be the ones who figure out the fastest how to cut down on waste while simultaneously improving the quality of the medical care they provide and making patients happiest,” said Sheryl Skolnick, a health care equity analyst and managing director at CRT Capital Group in Stamford, Conn.
Twenty-five million people will buy health insurance on the law's regulated "exchange" marketplaces in the states, according to the Congressional Budget Office. Medicaid will also add 11 million poor people and states are expected to contract with private health insurance companies to cover them.
But some will still fall through the cracks. Several states are refusing the federal money to expand Medicaid. Some Republican governors vowed last month they weren’t going to take the money to beef up Medicaid, leaving their poor and elderly to fend for themselves.
Aetna estimates that combining with Coventry Health Care, based out of Bethesda, Md., will save the merged company $400 million a year starting in 2015.
Edited by
Rachel Ramsey
