Coming health insurance mergers will cost consumers
The number of health insurers competing for your business almost certainly will decrease in coming months as the big for-profit firms merge or acquire each other. The companies insist that the results will enable them to operate more efficiently through the elimination of redundancies. But don’t expect your premiums to go down when the dust settles. In fact, if the past is prologue, premiums will go up.
The biggest beneficiaries will be the shareholders and a handful of top executives; they’ll make tens of millions of dollars on the day the transactions become final. Among the losers—in addition to the people enrolled in the insurers’ health plans—will be many of the employees of the acquired companies. And taxpayers in the cities that come out on the short end of the stick when the combined companies decide where the corporate headquarters will be.
Every one of the big five—Aetna, Anthem, Cigna, Humana and UnitedHealthcare—are either in play, rumored to be in play or have gone public with their intentions. Published reports late last week indicated that Aetna had agreed to buy Humana for $34.1 billion in cash and stock. Anthem Inc., the largest by membership, has offered even more, $47 billion, to buy Cigna. If approved, it would be the biggest deal in industry history. UnitedHealthcare would like to have Aetna and could still make a bid for it.
We’ve seen this movie before, and the ending can be predicted with some certainty. In almost every case, the rich get richer and the poor get poorer.
One of my jobs at Cigna was to help manage communications when the company bought another insurer, as it did in 1997, acquiring Healthsource, based in Hooksett, N.H., for $1.45 billion. Among the winners in that transaction: Healthsource’s CEO, Norman Payson. As part of the deal, Payson got a $100,000 a month—yes, a month—as a consultant with Cigna, in addition to $94.2 million for tendering the stock he owned in Healthsource.
Over the next several months, almost all of Healthsource’s employees were laid off. And Hooksett lost a boatload of high-paying jobs when all the administrative functions of the combined company were eventually moved to Cigna’s offices in Philadelphia and Bloomfield, Conn., a Hartford suburb.
When merging companies talk about becoming more efficient through the elimination of redundancies, what they are really talking about is getting rid of employees.
Other deals in the years before and after the Healthsource acquisition had the same result. In 1995, many Metropolitan Life and Travelers employees in New York and Connecticut and elsewhere were given pink slips when those companies sold their health insurance operations to UnitedHealthcare for $1.6 billion. The next year, Hartford-based Aetna completed an $8.8 billion merger with Philadelphia-based U.S. Healthcare. Then in 1999, Aetna bought Prudential’s health care operations for $1.6 billion. In every case, the executives and shareholders of the acquired companies made out like bandits. Thousands of rank-and-file employees, meanwhile, found themselves unemployed. In just the Aetna-Prudential deal, as many as 2,000 jobs were axed.
There’s more to this story. Click here to read the rest at the Center for Public Integrity.
This story is part of Wendell Potter commentary. Former CIGNA executive-turned-whistleblower Wendell Potter writes about the health care industry and the ongoing battle for health reform. Click here to read more stories in this blog.
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Copyright 2015 The Center for Public Integrity. This story was published by The Center for Public Integrity, a nonprofit, nonpartisan investigative news organization in Washington, D.C.
