Heated M&A activity makes for a hot summer in employee benefits
Although the summer months generally are known in the benefits industry for being somewhat slow and eventless, recent merger and acquisition activity have turned this summer into one that’s wilder than anticipated.
In a sign of an accelerating M&A trend toward “supercompanies,” three megadeals made a big splash in recent weeks:
- Anthem Inc.—already the nation’s second largest health-insurer, covering close to one-tenth of the U.S. population—expanded its reach, announcing plans to buy Cigna. The deal is worth $54 billion, Forbes estimates. If federal antitrust regulators okay the acquisition, the new company will be the nation’s biggest health insurance provider.
- Not to be left out of this summer’s M&A action, Aetna, also recently revealed plans to acquire fellow medical insurer Humana for more than $34 billion.
- Lastly, the benefits consulting world saw a shakeup this summer as Willis and Tower Watson announced plans to merge in a deal valued at about $8.7 billion.
We’re watching all three deals with interest to see how they play out and what the implications might be for the benefits industry. At the very least, a New York Times article says the Anthem move could “shrink the number of major companies in the health insurance industry from five to just three. And that could mean fewer options and higher rates for consumers and the employers that provide health insurance.”
Less choice plus higher costs presents a losing equation for benefits professionals, so future renewals may have pros more tightly wielding their purchasing power when shopping for cost-efficient plans and rates for employees. However, health care reform will give benefits professionals some respite since the law’s affordability provisions box in rate increases by insurance companies.
The Willis-Towers deal may also be an indicator of a bigger push toward private health care exchanges.
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