Blue Cross – Blue Shield insurer Anthem has agreed to acquire Cigna in a $54-billion deal. Earlier this month Aetna and Humana struck a merger deal for $37-billion. University of Nebraska – Omaha’s Finance, Banking and Real Estate Development Chairman Dr. David Volkman says there is one thing that has spurred these mergers.
Dr. Volkman says, “The reason for the mergers is the Affordable Care Act. The rulings restrict the pricings and margins that insurance companies can charge. They are looking at any way they can to keep profits up and one way they do that is merging with another company and decreasing their operating costs – and hopefully profits up.”
Now the question is if this will increase premiums? Dr. Volkman says insurance companies say they will be able to offer more competitive services because they have a larger power. They will be able to negotiate better with hospitals and doctors. However, every time you have less competition you have more pricing power and what you can offer consumers.
Dr. Volkman adds, “The theory shows when you have a decrease in competition you have an increase in rates. There is also the possibility there could be a decrease in service provided because they may try to consolidate other services. If they have the marketing clout to do it because they are so big they will do that.”
The two recent mergers leave only three big names left in the game with the third being United Healthcare.