By JK WALL
The nation’s Big 5 health insurers have thrived under the Affordable Care Act, seeing their profits grow and their stock prices soar.
They also continue to dwarf their main sparring partners—hospital systems—in size. Consider that the largest health insurer, United Health Group, has annual revenue of $130 billion, while revenue at the largest hospital system, HCA, is a tick under $37 billion. The second-largest health insurer, Anthem Inc., has $74 billion in annual revenue, while the second-largest hospital system, Ascension, has $20 billion.
So why are health insurers so desperate to get bigger? Anthem has offered $47 billion to acquire Cigna Corp., and United, Humana and Aetna are all trying to counter with mega-deals of their own.
Well, it’s about economies of scale and all that—the Affordable Care Act and other changes are squeezing the amount of profit insurers can make per customer, even as the pool of paying customers is growing. Also, hospital systems, while still more fragmented than insurers, are consolidating, as are drug and device makers. So insurers want to boost their bargaining power.
But the real reason is population health.
“In order to do population management, you need populations,” Dhan Shapurji, a Deloitte consultant to health insurers, quipped in a phone call with me this week.
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