Blog | Partnerships and Value

How Health Policy Contributed to the Recent Mega-Mergers Involving National Health Plans

Blog | Partnerships and Value

How Health Policy Contributed to the Recent Mega-Mergers Involving National Health Plans

Ken Perez discusses the potential for vertical mergers within health care.

During the first half of 2017, the proposed mergers of Aetna with Humana and Anthem with Cigna were blocked by two federal judges, both of whom concluded that the business combinations would lower competition in the health insurance market and bring about higher premiums for consumers. 

As a result, some national health plans have departed from the common horizontal merger approach. Currently, three national health insurers are involved in proposed or possible vertical mergers. In December 2017, CVS Health declared its intent to acquire Aetna, and this past March, Cigna announced its plan to acquire Express Scripts, the nation’s largest pharmacy benefits manager. And Walmart is reportedly in acquisition talks with Humana. Because of their size, the intriguing value delivery chains they would create, and their potential synergies, these mergers have been characterized as disruptive and industry game changers.

Healthcare policy has contributed to these mergers in several ways.

First, the possibility of a single-payer healthcare system has been greatly decreased by the election of Donald Trump as president in 2016, continued Republican majorities in both houses of Congress, and perhaps most significant, the passage of the Tax Cuts and Jobs Act of 2017 (TCJA) in December 2017. 

Politically, taking back something that has been given to the public is hard, if not impossible, especially in Washington, D.C. Establishing a single-payer healthcare system therefore would appear to be politically infeasible—at least until 2021—because it clearly would necessitate a major expansion of the federal government, requiring the repeal of the TCJA’s tax breaks for individuals and corporations, not to mention the imposition of tax increases.

Second, Medicare Advantage (MA), Medicare’s managed care program, continues to grow in importance for health insurers. MA has the support of congressional Republicans, and the program is gaining in popularity with Medicare beneficiaries. According to the Centers for Medicare & Medicaid Services, 20.4 million people will enroll in MA for 2018, up 9 percent from 2017 and roughly three times the growth of the total Medicare enrollee population. More than a third (34 percent) of Medicare beneficiaries are enrolled in MA. 

The proposed mega-mergers involving Aetna, Cigna, and Humana can be likened to a “land grab,” securing control of significant portions of the Medicare population, including material shares of the MA enrollee pie. 

Furthermore, the influence of the MA star ratings program, which measures and rewards clinical quality, customer satisfaction, and other beneficiary experience areas, has definitely grown. The PwC Health Research Institute reports that, in 2015, 52 percent of MA enrollees were in the highest-rated plans (4 or 5 stars) and that, by 2017, the rate had increased to 68 percent. Consumers clearly are considering quality in their enrollment decision making. 

If approved, the proposed mega-mergers would presumably improve MA star ratings performance, since the business combinations would provide broader value delivery chains spanning health insurance, pharmacy benefit management, retail and/or online pharmacy, and various other medication adherence-related and member engagement services. These integrated services could facilitate the imposition of various types of narrow networks, and ultimately could lead to improved population health management. 

Ken Perez is vice president of healthcare policy for Omnicell, Inc., Mountain View, Calif., and a member of HFMA’s Northern California Chapter.

About the Authors

Ken Perez


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