The number of health insurers competing for your business almost certainly will decrease in coming months as the big for-profit firms merge or acquire each other. The companies insist that the results will enable them to operate more efficiently through the elimination of redundancies. But don’t expect your premiums to go down when the dust settles. In fact, if the past is prologue, premiums will go up.
The biggest beneficiaries will be the shareholders and a handful of top executives; they’ll make tens of millions of dollars on the day the transactions become final. Among the losers—in addition to the people enrolled in the insurers’ health plans—will be many of the employees of the acquired companies. And taxpayers in the cities that come out on the short end of the stick when the combined companies decide where the corporate headquarters will be.
Every one of the big five—Aetna, Anthem, Cigna, Humana and UnitedHealthcare—are either in play, rumored to be in play or have gone public with their intentions. Published reports late last week indicated that Aetna had agreed to buy Humana for $34.1 billion in cash and stock. Anthem Inc., the largest by membership, has offered even more, $47 billion, to buy Cigna. If approved, it would be the biggest deal in industry history. UnitedHealthcare would like to have Aetna and could still make a bid for it.
We’ve seen this movie before, and the ending can be predicted with some certainty. In almost every case, the rich get richer and the poor get poorer.
One of my jobs at Cigna was to help manage communications when the company bought another insurer, as it did in 1997, acquiring Healthsource, based in Hooksett, N.H., for $1.45 billion. Among the winners in that transaction: Healthsource’s CEO, Norman Payson. As part of the deal, Payson got a $100,000 a month—yes, a month—as a consultant with Cigna, in addition to $94.2 million for tendering the stock he owned in Healthsource.
Over the next several months, almost all of Healthsource’s employees were laid off. And Hooksett lost a boatload of high-paying jobs when all the administrative functions of the combined company were eventually moved to Cigna’s offices in Philadelphia and Bloomfield, Conn., a Hartford suburb.