Aetna’s purchase of Humana confirms analyst predictions of continued consolidation as carriers vie for market share, a trend industry experts fear will limit choice and force brokers to reinvent their business approach.

Aetna agreed to buy Humana, the second-largest provider of private Medicare insurance, for $37 billion in cash and stock to broaden its health care coverage, the companies said in a statement Friday. Analysts had predicted an Aetna acquisition was ‘imminent’ as carriers continue to grapple with the implementation of the Affordable Care Act and its impact on carrier costs and risk.

“It's an arms race for market share,” says Perry Braun, an EBA Advisory Board member and executive director of Benefit Advisors Network.  “For brokers this will represent fewer options in the market,” he says.

See also: What would an Aetna acquisition mean for brokers?

Wendy Keneipp, a partner and coach at Q4intelligence, agrees, and says fewer options after the merger and regulatory requirements for plan design mandated under the ACA don’t rule brokers out of the equation, but instead offer a call to action for a new approach to client relationships.

“I think this should be a lesson for brokers to watch,” she says. “Requirements for plan designs reduce alternatives and the need for competitive creativity. Couple that with the need to streamline expenses for MLR and we have a recipe for an increasingly commoditized and consolidated industry. Brokers can follow suit and narrow their own options along with the consolidations, or they can use the consolidations as a way to further disrupt their own playing field by shifting their focus to non-commoditized ways of working with clients.”

As the industry consolidates, so, too, will the brokers, Keneipp adds.

“To remain independent it takes a strong vision, a strong leader, and a team excited about making a difference,” she says. “Product consolidation just provides further incentive for those motivated to be the difference-making independents in their area. And the right clients will seek out those committed to that model because it will be an incredibly powerful partnership focused on strategic advice, rather than just product choice.”

See also: Why the Willis, Towers Watson merger won’t be the last

Braun says in some markets where network overlap and membership overlap results in consolidation, “the merger could provide a more competitive product against larger market share leaders.” In most markets, he says, this would be the Blue Cross Blue Shield franchise.

The impact to the providers, he says, “could also create disruption which could result in an opportunity for an adviser to guide an employer and their employees through the disruption.”


Analysts predict the Aetna acquisition won’t be the last. In fact, Ana Gupte, an analyst with Leerink Partners predicts the “big five” insurers will eventually merge into a “big three,” likely composed of Aetna, Anthem and UnitedHealth.

“The industry is far more regulated under Obamacare and so companies need to do a better job at negotiating better unit costs and contracts,” says Gupte. “Market share helps. The larger you are, the stronger standing you have.”

In June, Cigna rejected a $47 billion takeover bid by Anthem, saying it was inadequate and not in the best interests of shareholders.

With the Aetna, Humana merger now sealed, Braun says, “it will be interesting to see how Cigna and UnitedHealth respond.”

“Consolidation eventually reaches every industry and it’s our time for major disruption from every angle – the products, the carriers, the distribution, the advisers, the networks, the providers – no one is immune,” adds Keneipp.

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