Healthcare’s new order
The healthcare and benefits industry is undergoing a radical sea change as the private sector appears to have run out patience with the high cost of medical coverage. In response to rampant inefficiencies, inscrutable business practices and soaring costs, leading employers, insurers and brokerages are forming new alliances at a furious rate. Here we look at some of the major reshufflings that have taken place over the past 12 months and their potential impact.
CVS Health buys Aetna for $69 billion
CVS Health made waves when it announced that it was buying health insurer Aetna for $69 billion. Industry observers think that the combination will allow the drugstore super-chain to promote its in-store health clinics to employers as a low-cost alternative.
Cigna buys Express Scripts for $54 billion
In the view of many advisers, Cigna’s $54 billion bid for pharmaceutical benefits manager Express Scripts may do little to lower drug costs for employers and their employees. But it could help the giant insurer gain greater control over its pharma spend, leading to more flexibility in its health plans.
Walmart and Humana eye major consolidation
Long rumored, Walmart’s potential purchase of health insurer Humana could give the nation’s largest employer control over the healthcare received by its 1.5 million employees. The acquisition could allow the mega-retailer to lower its benefits costs while improving medical outcomes for its workforce.
The Hartford buys Aetna’s life, disability business
In October 2017, The Hartford purchased Aetna’s life and disability insurance business for $1.45 billion, making it the second largest group life and disability insurer with approximately $5 billion in expected premium. Under the deal, The Hartford would have access to Aetna’s mid-to large-sized employer client base, which brought in $2 billion in premiums in 2016, and would bring an estimated 20 million new customers into the fold. But the deal was not all about the money: It also gives The Hartford has access to Aetna’s data analytics and integrated absence management platform.
Albertsons buys Rite Aid
While pharmaceutical retail giants CVS and Walgreens both made headlines with pricey acquisitions last year, grocery chain operator Albertsons Cos. bought runner-up drugstore chain Rite Aid for an undisclosed sum. The new combined company now has an estimated value of $24 billion and nearly 4,900 stores, including 4,350 pharmacy locations, in 38 states. The deal allows Rite Aid to sell pharmaceuticals and goods inside Albertson’s grocery stories without opening new standalone Rite Aid outlets.
Court blocks Aetna-Humana, Anthem-Cigna deals
Not all megadeals go through in the healthcare sector. After months of legal wrangling, Aetna dropped its proposed $37 billion takeover of Humana in February 2017, the same month that a judge ruled against Anthem’s proposed $48 billion merger with Cigna. According to media reports, Aetna and Anthem were looking to buy Humana and Cigna respectively to fortify themselves in the wake of regulatory changes that were the result of the Affordable Care Act.
Benefit brokerage Alera grows at furious pace
Mergers and acquisitions fever isn’t just running hot in the healthcare and retail pharmaceutical sectors. It’s spilled over into the brokerage industry as well. A case in point is the acquisition-happy Alera Group. Formed in 2017 through a merger of 24 independent employee benefit, P&C and risk and wealth management firms, in early 2018 it launched a string of deals with the purchase of Wilson Albers & Co. in early 2018. That transaction was quickly followed by a fast-paced rollup of insurance and benefit brokers across the U.S., and Alera Group CEO Alan Levitz says the company is in discussions with 40 more firms with revenue ranging from $2 million to $40 million. What’s prompting all the deal making? The average age for a benefits brokerage owner is 55, and with valuations at all-time highs they are eager to sell.