The most recent news in healthcare consolidation is certainly the insurer mergers: Anthem’s purchase of Cigna and Aetna’s of Humana. Consolidation has ramped into high gear throughout the healthcare industry – and it means we are in store for continuous change.
Since I started in this business, I have watched the market shrink from in excess of 20 health insurers, to now, potentially only three national carriers and a host of regionals. What this means is that thousands of people will lose their jobs over time – an unfortunate byproduct of any consolidation – and there will be fewer choices in the market. We’re going to need to learn to deal with these, and a host of other ongoing changes, and move forward.
The list of consolidation and movement in healthcare is continual and vast: ACE Group recently completed a deal for the property and casualty insurer, Chubb, and previous to that, Fireman’s Fund. On the broker and consulting side, Willis Group has acquired Towers Watson, who purchased Watson Wyatt only a few years back. And other large national brokers are expanding through acquisition seemingly on a weekly basis.
My projection of how things will move forward within this landscape of continual change starts with examining the impact that health insurers will experience. Insurers are already seeing droves of employer customers switch to self-insurance, a phenomenon which will only continue and further erode their profits. And in one of the greatest shifts, governmental entities will become their largest customers in the individual exchange, Medicaid and Medicare Advantage sectors. Ongoing negotiations with the government on costs will be challenging since there is a scarcity of taxes to pay for escalating healthcare expenses and as the market shrinks, fewer private payors to whom to shift costs.
The reality is that for business to go on, adapting to continual change is paramount. There need to be strong carriers with vast end-to-end resources in managing health and wellbeing. Providers will have it easier when dealing with protocols of just a few insurers, rather than with many. In fact, to meet this challenge, providers are also combining at a record pace. And as our business transforms, it will be easier for brokers to place clients under a self-insured arrangement. Employees and their families, who have been traded around between various carriers over the years, will come to enjoy the consistency of being with one provider over many years.
As my boss told me on my first day, “The only thing you can count on in life is change”. And we press on.