The health insurance market in a post-ACA world
As Anthem acquires Cigna, Aetna acquires Humana, and Centene acquires Healthnet, the health insurance industry is in a phase of rapid consolidation. Part of this move towards consolidation is driven by the minimum Medical Loss Ratio implemented by the Affordable Care Act (ACA), which limits the amount of margin payors can take in from premiums. With caps on profitability, M&A has become the primary lever for delivering shareholder returns.
The other major driver of this consolidation is how the new health exchanges are changing patient behavior to be more value-conscious. When individuals are given more choices, it turns out that they are quite price-sensitive – in fact, they’re even more price-sensitive than their employers. A preponderance of evidence shows that on average employees choose lower-cost coverage when they make that choice themselves, rather than when their HR benefits team chooses for them. And in doing so, they save money for themselves, and for their employers.
The new reality in the health insurance market is that value conscious employees and consumers are creating ripple effects of change in the industry, and this is just the beginning.