Will ‘Mega-mergers’ of Health Care Delivery Services Affect Employers?

Will ‘Mega-mergers’ of Health Care Delivery Services Affect Employers?

January 26, 2018 Health Insurance & Employee Benefits, The Beacon Blog 0 Comments

The topic of health care in the U.S. has been front and center for some time now, and recent developments suggest it’s going to continue to be a prominent issue. Major consolidation has been taking place as large conglomerates offering different types of health care services merge, but the potential outcomes of these mergers are largely unknown. With uncertainty surrounding outcomes, what might this trend mean for employers?

Recent major mergers

In December 2017, it was announced mega-pharmacy chain CVS was purchasing health care benefits provider Aetna for $69 billion. Around the same time frame, UnitedHealth, another major carrier, stated its plans to purchase DaVita Medical Group for $4.9 billion to operate within its own Optum unit. DaVita is a health care provider that operates hundreds of medical clinics, dozens of urgent care centers and six outpatient surgery centers in the western U.S. Earlier in the year UnitedHealth purchased Surgical Care Affiliates for $2.3 billion.

Potential impact of ‘megamergers’ on employers

It is too soon to accurately know the impact these “mega-mergers” will have on employers. However, many are skeptical about what’s coming down the pike. According to a Forbes report, a survey conducted by Aon found 85 percent of employers believe “significant or moderate” changes to how people access health care in the future are coming; the remaining few (15 percent) believe there will be no real impact.

Overall, employers are taking an appropriate “wait and see” approach, but there are some questions that will soon need to be answered:

  • How will employers manage pharmacy and medical benefits going forward?
  • Will Aetna charge premium rates for consumers to go to companies outside of CVS (i.e. competitor Walgreens) for their prescription needs?
  • What effect will the merger have on competitive pharmacy pricing?
  • Will mergers reduce consumer choice when it comes to health services?

Time will tell how these mergers will affect the way employers buy employee health care benefits. It will likely boil down to how and/or if pricing is changed after these mergers are completed. Some suggest prices may decrease; others worry they will increase. The Aon survey found more than 50 percent of employers currently keep medical and pharmacy separate and do not anticipate any immediate changes. About 25 percent already have integrated medical and pharmacy.

Looking toward the future

The health care industry is already complex, so a big question is, will these mergers streamline services to make them more efficient, bringing down costs for employers? Or will the combination of health delivery services create an environment conducive to making costs skyrocket even more?

Regardless of how these mergers play out, one thing is for certain. Major deals that consolidate different types of health services will have a definitive impact on the health care industry for both employers and consumers. For instance, will other companies follow suit and “team up”? Toss Amazon’s potential entry into the pharmaceutical space into the mix and it clouds the waters even more. If these events occur, what will happen to the overall health care market? The future remains unclear but chances are any potential major changes won’t be realized until 2019.

About the Author

Anthony Cellucci

With over twenty years of experience consulting businesses in the area of Employee Benefits and Insurance, Anthony delivers expert advice and benefits solutions to his clients. He is a co-founder of The Beacon Group of Companies, a broad based financial services firm located in King of Prussia that provides companies with the highest level of industry expertise and ongoing client service.