Aetna Inc (NYSE:AET) and Humana Inc (NYSE:HUM) announced a recent merger deal worth $37 billion, making it the biggest deal in the insurance industry.
Aetna’s acquisition of Humana comes after many weeks of pondering over which firm would be the ideal partner to merge with. There has been a lot of competition in the industry, and the global trends have been pointing to many mergers and acquisitions in various industries over the first half of the current year. Therefore taking that path seemed like the right way to go for various reasons.
When such a merger or acquisition takes place, the conglomerate gains more leverage over the competition. This involves the use of various strategies such as lowering the costs to attract more customers. Additionally, mergers usually have more cash at their disposal. Therefore, they can develop new products or services because they are less bound to financial constraints.
According to Aetna Inc (NYSE:AET)’s Chairman and CEO Mark Bertolini together with Humana’s President and CEO Bruce Broussard, The Affordable Care Act had a lot to do with the merger decision. Bertolini claimed that the act is handing over more power to the final consumer so that they have more to say about the products they purchase from the insurance firms.
The deal, therefore, had a lot of influence from the ties between the provider and the insurance firms. He also pointed out that the services have shifted their focus from the amount paid or each service to the various ways they create partnerships that are rewarded based on the population heath improvement. It is, therefore, different from the past relationships.
In this case, consumers and insurers have a good opportunity from the Affordable Care Act despite the hiking premium prices. One of the biggest benefits of the ACA for consumers is the price restrictions imposed on the companies. Apart from the regulated pricing, the ACA fosters more competition among the players in the industry thus leading to better quality products and services.
