- Speculation of large insurance mergers among Aetna, Anthem, Cigna Corp. and UnitedHealth Group would likely prompt Department of Justice scrutiny and make such deals costly, reports Modern Healthcare.
- Some of these potential deals are enormous—a UnitedHealth purchase of Aetna would create an organization with projected revenues of over $200 billion. That kind of market heft would put payers in a better position to battle rate increase demands from merged hospitals.
- Financial analysts say more mergers and acquisitions will happen this year, but insurance execs stress that transactions must make strategic sense.
The media frenzy around potential mergers is ongoing, but analysts caution that not all rumors should be treated equally.
"We caution investors to be careful about every media report that cites, 'sources close to the situation,' because it is clear that not all of these combinations can occur," Barclays Capital analyst Josh Raskin wrote in a research note Monday. "It is quite obvious to us these media reports are not catching the whole story, and there are significant pieces of information that need to be confirmed."
For example, UnitedHealth is reportedly interested in buying Aetna, which would cost about $64 billion. Since both companies have a large overlap in Medicare Advantage and commercial markets, it could lead to mandated divestitures. Analysts also question what returns the merger would provide.
"Clearly, United can generate organic growth, and they have Optum," said Sheryl Skolnick, managing director at Mizuho Securities USA. "It's not as if they have to have a health plan consolidation in order to continue to grow."
Other reported potential mergers include Aetna and Cigna buying Humana, and Anthem seeking to buy Cigna. "It strikes me as lack of a stratgic focus," added Skolnick. "I just don't get the feeling that there is that kind of thoughtful, disciplined, controlled process, and that concerns me."