How The 2010 Healthcare Law Fueled Insurance Merger Mania

Just within 2015, Anthem Inc. purchased Cigna Corp., Aetna Inc. acquired Humana Inc., and UnitedHealth purchased the prescription drug benefits manager Catamaran.

These are only some of the mergers and acquisitions that have proliferated in the healthcare industry over the last few years, largely stimulated by the healthcare overhaul law.

According to a Washington Times report, millions of people have been getting their health insurance coverage since 2010. That was the year when the healthcare law, officially the Patient Protection and Affordable Care Act, was enacted. The law expanded healthcare coverage to more people in various ways, like Medicaid expansion and state public health insurance exchanges. It also required insurers to spend more premium dollars on coverage.

As the health insurance market expands, health insurers face new pressures to keep their respective costs down. At the same time, they can buy one another or make deals faster. These deals allow them to diversify their business and spread out their costs. Many choose to bulk up their Medicaid and Medicare businesses, because these two programs keep growing. In addition, companies that get bigger generally gain more power to negotiate prices with drug companies and healthcare providers.

Health insurance business mergers and acquisitions in recent years have amounted to over $100 billion. Anthem’s and Aetna’s purchases alone have a combined worth of $80 billion, while UnitedHealth’s is at $12 billion. If all these deals go through, says the Times report, Anthem, Aetna, and UnitedHealth will each generate over $100 billion in annual revenue.

There are also smaller deals, especially those focused on technology. The flood of new patients entering the market has prompted insurers to look for more efficient and money-saving systems. This caused a rise in the demand for technology services in healthcare.

The Washington Times concluded that this changing landscape in healthcare is only part of the impact that the 2010 healthcare law has made in the nation.