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Author:

Eric Krieg

Eric Krieg

Eric Krieg is an industry disruptor with 30 years of experience in employee benefits brokerage and consulting. He informs employers and the media on how the employee benefits industry really operates. Krieg has served on national advisory boards for Aetna, United HealthCare, CIGNA and Guardian, as well as regional groups for Anthem, Kaiser Permanente and Medical Mutual. He began his career at Aetna and later served as senior vice president and group benefits business leader for one of the nation’s largest independent insurance brokerage and risk management firms. In 2014, Krieg launched the industry’s first benefits advisory services practice of its kind at Risk International, an independent risk and benefits management firm. Skilled in TCOR (total cost of risk) methodologies, he advises employers on LEAN benefits management techniques. Since 2011, Krieg has presented at conferences, seminars and webinars on various topics, including the ACA, wellness and health exchanges/marketplaces. A graduate of the University of Toledo, his professional designations include GBA, ChFC and CLU.

Eric Krieg

With the big five — United Health Care, Anthem, Aetna, Humana and Cigna now (Aetna acquires Humana) — down to the big three it is critical that employers use new approaches to control medical costs. If anyone is hoping that these recent deals will create better employer or consumer outcomes you must be living in one of the states that legalized marijuana.

The big three are looking to the future as they should and want to be positioned to survive as we grow closer to a single payer world in healthcare. That world is still a ways away and is also why employers CAN NOT stand pat and rely on the remaining health plans to be their advocate.

So the biggest deal in the history of health insurance just went down and we’ve got questions. Let’s explore what you need to know about the deal.

The Scoop on Anthem

  • A Blue Cross Blue Shield (BCBS) organization in 14 states
  • $78.5 billion in revenue and 38.5 million members
  • Large percentage of fully insured medical business
  • Health plan market presence (individual plans in addition to commercial employer based and government plans)

Commercial employer based

  • Small group
  • Middle market
  • Large market

Government plans

  • Public exchanges
  • Medicare and Medicaid

Direct to consumer

  • Individual health plans

Strengths

  • BCBS brand
  • Well positioned with government plans
  • Ability to transition and sell direct to consumers
  • Medical provider relationships and discounts
  • Breadth of presence in all key health insurance market segments
  • A top-three player in all markets served

Weaknesses

  • Systems and technology
  • BCBS cost structure to assemble a national network
  • Inferior non-medical products (e.g. dental, life, disability)
  • No international presence

Cigna’s Story

  • A commercial insurance carrier specializing in health, dental, life and disability
  • $36.5 billion in revenue and 14.5 million members

Commercial employer based business

  • Middle to large market
  • Self funded plans
  • Multi-state business
  • International presence

Strengths

  • Systems and technology
  • Multi-state health plan business
  • Competitive non-medical business (e.g. dental, life, disability)
  • International presence

Weaknesses

  • Ability to transition in the wake of the new and evolving health insurance market place
  • Government plans
  • Direct to consumer
  • Medical provider arrangements
  • Lack of a consistent competitive position in markets served

Why the Deal Looks Good to the Players

As you can see the opportunities for synergies are abundant. When you look at Anthem’s strengths and weaknesses, their weaknesses happen to be Cigna’s strengths. One could question Cigna’s ability to stay relevant in the health insurance arena long-term given their lack of consistent competitive position in the markets served and their limited presence in Medicare/Medicaid and public exchanges. Consequently, there is a significant upside to both Anthem and Cigna.

Challenges: What Could Go Wrong?

The size of the deal will make merging systems, and cultures very challenging. The insurance industry has not proven effective with its use of systems and exploiting efficiencies.

How will the National BCBS association react? Anthem will now directly compete against BCBS organizations outside of its 14 state BCBS representation? This will be a problem.

Outcomes: What This Deal Entails

  • Size – yes
  • Growth – yes
  • Expense reduction – this will take quite some time to realize
  • Synergies – available
  • Margin – Yes
  • The consumer/employer – less competition means less leverage and the insurance companies LOVE to make the rules and dictate the outcomes.

Next up: How employers need to rethink their strategies for navigating the evolving health plan marketplace.