Anthem's announced $54.2 billion takeover of Cigna Corp. last week is the latest and largest sign of health insurers' lust for scale. But at the heart of the merger momentum is their desire to expand their government business, particularly in the lucrative Medicare Advantage market.
Investors now have a heightened interest in behavioral health after new laws have gone into effect giving treatment for mental disorders payment parity with physical illnesses. Insurers and government payers also are beginning to see treatment of behavioral health disorders as a wise investment.
Hundreds of private-sector ACOs are taking shape across the country. For some, these deals will prepare providers and payers for fully capitated arrangements in which providers are paid a global fee per member for managing an enrolled population's healthcare.
An insurer's transformation: Humana's evolution into Medicare powerhouse offers strong lure to Aetna
An acquisition by Aetna would bring an end to the half-century of radical company makeovers by Humana and create an insurance giant in the fast-growing market for government-subsidized health plans.
Federal antitrust reviewers will likely look market to market in deciding whether to approve the proposed Aetna-Humana merger and other looming health insurance industry tie-up deals, experts say.
President Barack Obama last week nominated Andrew Slavitt to a permanent post as CMS administrator.
In preparation for a Humana takeover, Aetna has lined up commitments for $16.2 billion in financing for the proposed cash and stock deal. But the volatility in the insurance companies' shares suggest that investors wonder whether the deal will make it to the finish line.
Legal experts agree that massive insurer consolidations will likely draw intense antitrust scrutiny, but whether those reviews will destroy the deals is an open question.
Insurer Humana is no stranger to transformation since its founding in 1961. But the company's proposed deal to be acquired by rival Aetna is more likely driven by powerful market forces rather than by the need for another makeover.
Aetna's proposed $37 billion offer for Humana is about building strength and scale in the government insurance business, but some investors are nervous about whether the parties can deliver on expectations.
Aetna has signed a nearly $35 billion deal to buy rival Humana, which would dramatically expand its Medicare Advantage business.
The CMS has revealed reimbursement amounts to compensate health plans as part of the ACA's reinsurance program and some plans may be sorely disappointed.