Aetna buys Coventry Health Care in a Medicaid land grab
Tess Vigeland: It's time to talk about another giant health care deal. Insurers buying insurers, to be specific.
In July, WellPoint snapped up Amerigroup for $5 billion. And today, Aetna announced it's swallowing rival Coventry Health Care for $5.7 billion.
Open wide and say "ahhh." Dan Gorenstein of New Hampshire Public Radio reports these insurance giants are pulling out their checkbooks because a whole lot more people are about to get insured.
Dan Gorenstein: Aetna says scooping up Coventry will double its Medicaid members. And considering that many states may increase their Medicaid patients under the new health care law, that's a big deal, says the The Urban Institute's John Holahan.
John Holahan: If every state expanded to cover Medicaid, it would be $931 billion between 2013-2022. So it's a lot of money.
Angling for more government business -- namely Medicaid and Medicare -- is becoming routine for insurance giants. Both WellPoint and Cigna bought up smaller companies in the past year.
See how much your state will spend under expanded Medicaid. View an Interactive Map
But Duke business professor Peter Ubel says health care reform isn't the only reason.
Peter Ubel: It is a consolidation battle almost between insurers and hospitals.
Ubel explains that big means leverage. In recent years, hospitals have been buying up medical practices to gain clout in negotiations with the insurers. Now insurers are bulking up. Ubel says that could be a good thing for you and me.
Ubel: Normally you would think the fewer insurance companies there were, the more expensive insurance would be because they have more monopoly power. But what they are often doing is, the insurance companies are going to hospitals and negotiating lower rates from hospitals. And that might allow them to offer less expensive insurance.
What's the right mix of mammoth insurance companies and behemoth hospital networks? Ubel says no one knows. But he says when it comes to health insurance consolidation, while big doesn't necessarily mean good -- it doesn't necessarily bad either.
I'm Dan Gorenstein for Marketplace.