Healthcare Reform and the quest to reduce waste is back in the news today. The ACA has produced some tumultuous results in the healthcare industry as reported by Insurance Business America in the following report by Jill Gregorie. Our analysis follows the report.
“Anthem Inc has agreed to purchase Cigna Corp for $54.2 billion in a blockbuster deal representing “the biggest ever in the health insurance industry,” Reuters reports.
Cigna initially opposed the transaction and declined an earlier offer of $184 per share. After weeks of negotiations, however, Cigna agreed to $188 per share and the provision that the new company will feature several Cigna leaders on its executive team.
If granted regulatory approval, the acquisition would create the nation’s largest health insurance company by membership, providing health plans for more than 53 million Americans.
The transaction still faces several antitrust hurdles, however, as officials plan to investigate the impact it would have on competition for Medicare, personal and commercial insurance. Since Aetna Inc recently bought Humana for $37 billion, this transaction would reduce the number of publicly traded health care providers from five to three.
UnitedHealth Group is the only major player shying away from the industry’s “merger mania,” which some analysts attribute to insurers seeking out better cost efficiency and scale in the wake of the Affordable Care Act.
The companies are aiming for the deal to close in the second half of 2016.”
Healthcare costs were a major focus of the Affordable Care Act (ACA) as politicians and healthcare industry experts debated Healthcare Reform in 2010. Some debated that the consumer, the patients of the healthcare system, needed more competitive opportunities to directly negotiate for higher quality care among care providers in a free market system (doctors, clinics and hospitals earning patients with good service and competitive rates). Others argued that it was the wasteful spending of the healthcare system that caused a prohibitive cost for patients and that reducing “waste” through consolidation would allow a lower health care cost across the system. The latter argument prevailed in the eventual legislation and the challenge to reduce costs in billing, medical treatment, lab testing, follow-up care and any other cost associated with the treatment of patients has been a driving factor of providers of all kinds in the healthcare system.
One effect of the legislation put forth in the ACA was the consolidation of both medical providers and insurance carriers in order to achieve the bargaining power necessary to operate in the new environment. Hospitals and doctors merged to have better negotiating advantage with insurance providers and suppliers, and the suppliers and carriers did the same to provide the economies of scale needed to meet expected discounts.
Will the consolidation of healthcare providers and health insurance carriers achieve the results of affordable, quality care for U.S. patients? Behind the headlines are hundreds of thousands of professionals working in the fields medical insurance, medical supplies, and medical care to achieve the goal of high quality healthcare for patients. For those who provide services to consumers, the challenge is to obey the new laws while delivering the best services and products they can.