Why Any Merger is the Last Resort of Lousy Marketers

It might be funny if it weren't so scary. Aetna is wooing Humana and Anthem is pursuing Cigna. As I write, it looks as though Aetna may prevail, but the Department of Justice is frowning on the Anthem deal. Aetna has $37 billion on the table, and Anthem is offering $53 billion.

Ask the companies involved to justify such vast sums and they'll say: “We're just want to save customers money and improve healthcare.”

Spouting this level of BS should be a federal crime.

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Anthem recently sent a letter to policyholders justifying its proposed Cigna merger, asserting that the merger “will only serve to fuel, not dampen, the strong and growing competition in this highly active marketplace.”

Really? Is this the new healthcare math — the fewer the insurance companies, the greater the competition and the lower the premiums? According to Anthem, every dollar of savings due to increased “efficiency” will flow directly to employers and their employees. Everything is for the good of the policyholder.

The Affordable Care Act was designed to regulate healthcare insurance companies and introduce real competition to the healthcare insurance industry. Consumers soon discovered they could usually get the coverage they need at affordable prices.

Insurance companies hate this. Competition is great when it means setting hospitals against one another, kicking popular drugs off formularies, and cutting doctors' salaries, but it's not much fun when it's your lunch that's being eaten.

The premise behind these mergers is phony. How will having fewer insurers give consumers more leverage to negotiate lower premiums and expanded options?

Instead of letting them merge, bust 'em up! Here's another idea — let consumers buy insurance from any state in the union. Or how about this: Roll back the cancellations of small business policies. Just because a company has only one or two employees, it still should be allowed to fund their healthcare plan.

What do doctors think? Well, the American Academy of Family Physicians predicts that mergers will “limit choices for consumers and decrease competition within the health insurance industry.”

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The American Hospital Association agrees: “The unprecedented level of consolidation these deals threaten could make health insurance more expensive and less accessible to consumers.”

I've never been a fan of mergers. They're often the last resort of a lousy marketer. Mergers punish innovation, quash creativity, and cost thousands of excellent people their jobs. Nobody benefits except for a few C-suiters.

You may think this isn't your problem, but it will be. If you own stock in Aetna, Humana, Anthem, or Cigna, complain to the board. Shoot your congressperson an email. Tell them no more mergers! Standing up now may be the best health insurance decision you'll ever make.

Sander Flaum is principal of Flaum Navigators. 

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