CVS Health is going to need a few more dimes than the guys in Blazing Saddles. Why? Because CVS agreed to buy Aetna insurance for $77B. Apparently CVS wants to win the contest for the longest press release title ever: “CVS Health to Acquire Aetna; Combination to Provide Consumers with a Better Experience, Reduced Costs and Improved Access to Health Care Experts in Homes and Communities Across the Country.” Why the merger? According to a Reuters article, “Expanding the (CVS) clinics could eventually save the combined company more than $1B annually by substituting low-cost treatments in CVS stores for more expensive hospital visits.” While the impact on patients is unknown, remember CVS stopped selling tobacco products in 2014, so we’re saying there’s a chance this is a good thing.
Insurance: taking the safe path that might cost you now, but will benefit you in the long run. Insurance company Aetna apparently tried the safe path to accomplish a “megamerger” with Humana by pulling out of ACA exchanges where the two were competing. According to Judge John D. Bates, who officially blocked the merger on Monday, Aetna pulled out of these markets not simply due to profit concerns, but to “improve its litigation position.” Turns out, as anyone with insurance could tell you, the safe path doesn’t always benefit you as much as you think it will. The blocked deal doesn’t bode well for the Anthem-Cigna merger, which has a larger price tag than the Aetna-Humana deal and is similarly stalled by the US Justice Department.
Aetna is splitting up with 11 of its 15 Affordable Care Act insurance exchanges. These cuts come after other major insurers — UnitedHealth and Humana —announced similar plans. Insurers leaving the marketplace reduces competition, which, according to your high school Econ teacher, is bad news for consumers. Additionally, fewer insurers could undo some of the progress the ACA has made (Think: better access to care, lower out-of-pocket costs, and higher quality care). So why the pull-back? Some are hinting that it’s simple retribution but Aetna reported a $200 million loss from its individual insurance, citing lack of healthy people to balance out high-cost customers. And why aren’t healthy people buying on the exchanges? Ask your 20-something, self-employed cousin about premiums vs. the penalty fee. (Hint: one is *much* lower).
The Justice Department filed a lawsuit to block two big insurance mergers, citing that reduced competition would be bad for consumers. In one deal, Aetna would buy Humana for $34 billion. In the other, Anthem would buy Cigna for $48 billion. These mergers would make a dent, reducing the number of mega insurance providers in the US from 5 to just 3. And even worse than a new insurance card, Justice is afraid your coverage could get a *lot* more expensive. Meanwhile, United, the only top 5 insurance company not invited to the party, is just chillin’, wondering who called the cops.