This morning two big mergers in the health plan world.  The two biggest (ex-)Blues merge (Anthem and Wellpoint), and United buys MAMSI, the big commercial HMO on the mid-Atlantic states.  In the Blues case the market has marked down the acquirer and upped the stock of the target, suggesting that they are paying too much. United’s stock price is dipping too as MAMSI’s has gone up.

So why are they buying now?  Health Plans, as evidenced by results released today from Anthem, Wellpoint and Humana, are banking in the bucks.  We can expect profits in the insurance business to start to slowly fall from this high point of the underwriting cycle. One possible explanation for the timing of the merger is that Anthem and Wellpoint have been acquiring smaller Blues plans at a rapid clip, and of course have been bidding up their price. Now there is only one major buyer for smaller Blues, so you can expect this to be the last time that Anthem pays too much!

One last comment–there is now a national for-profit Blues organization with some 26 million members in one organization, roughly one third of all Blues members. As a national force the Blues have never really existed, but individual Blues have been very strong in individual states. As so many individual Blues will now be controlled from Indianapolis, we might expect some slow changes, but health care is still a local good.