Last month there was some big consolidation news in the world of health care – on July 3, 2015, Aetna and Humana announced a definitive agreement in which Aetna will acquire Humana for $37 billion (see Aetna To Acquire Humana For $37 Billion) and Anthem announced their pending acquisition of Cigna (see Anthem To Acquire Cigna In Largest Ever Health Insurance Deal).
The Aetna team characterized the Humana deal as one to create a company that holds a majority of the Medicare Advantage market and leverages Humana’s chronic care capabilities. On paper, the combined company will have more than 33 million medical members, based on memberships as of March 31, 2015, and projected annual operating revenue of $115 billion. On the Humana side, there are 9.7 million medical members, 3.9 million dental plan members, 4.3 million Medicare Part D prescription plan members, and 2.4 million Medicare Advantage members. Total revenue across all lines of business was $48.5 billion. Aetna has 23.7 million medical members, which includes two million Medicare Advantage members, 15.6 million dental members, and 15.4 million pharmacy benefit management members. Its total revenue across all lines of business was $58 billion.
Indianapolis-based Anthem, a Blue Cross and Blue Shield insurer, will acquire Cigna for $188 per share, the health insurance companies announced. The deal, including Cigna’s debt, is worth $54.2 billion. It is the largest ever health insurance transaction, based on enrollees. The merged insurer will cover 53 million members. The transaction is expected to close in the second quarter of 2016.
So, how does this change the landscape? The United Health Group system (including its subsidiaries) still has the largest enrollment with 70 million members. Second is Anthem at 53 million members, followed by Aetna at 33 million members. This means the top three insuring organizations cover 48.9% of the U.S. population.
The implications of these deals for the executive teams of provider organizations is a bit like the childhood game of musical chairs. As large insurers consolidate, there is “one less” insurance organization for contracting. With these mergers, provider network consolidation is sure to happen. And, as health insuring organizations move to value-based relationships with provider organizations (including ACO partnerships) even the size of those provider networks will shrink. The result will be narrow networks by design or by default – but either way the results will be the same.
So what is the strategy that provider organizations need to thrive in this time of health plan consolidation? If your strategy includes revenue from third-party payers, your organization’s marketing and business development needs a deliberate and focused strategy to identify and develop strategic, value-added relationships with the health plans that have the significant market share in your service area.
For coverage of recent health plan collaborations with ACOs, check out:
- University Hospitals & Anthem Announce New ACO
- Cigna & Providence-Swedish Health Alliance ACO Launch Partnership
- Aetna & CHI Health Create Nebraska’s First Product-Based ACO
- Blue Cross Launches Four New ACOs In Illinois
- Aetna & HackensackAlliance ACO Announce New Collaboration
For more on marketing to health plans and value-based contracting in health plans, check out these resources in the OPEN MINDS Industry Library:
- What Does Marketing To Payers Really Look Like?
- How Much To Spend On Marketing? Use Marketing ROI
- RFPs Remain A Marketing Priority
- Best Practice Provider Marketing? Think Push & Pull
- What Do Payers Want? They Want You To Define Your Value!
And, to build the executive team that is “up for the challenge” of this changing market, join me in historic Gettysburg for The 2015 OPEN MINDS Executive Leadership Retreat, and my plenary presentation, What’s Your Leadership Strategy? The Challenges Of Leadership In A Time Of Innovation.