ACA Pushes Flurry Of Consolidation Among Health Insurers

In the wake of the Affordable Care Act (ACA), there has been a flurry of announcements of planned consolidation talks and agreements among several of the industry’s largest health insurance companies in recent months.

Insurance rating giant A.M. Best attributes this increased interest to the combination of the need for diversification given the lack of organic growth in the commercial/employer sector, the recent expansion in government-sponsored programs, such as Medicare and Medicaid, and the opportunities these provide for expansion of revenue and earnings.

A new A.M Best special report, titled “Top U.S. Health Insurers Looking to Diversify Operations & Revenue Streams, Increase Scale,” states increased scale will help insurers achieve a lower administrative expense ratio in the medium- to long-term due to the ability to spread costs over a larger membership base. Greater scale also creates the potential for increased bargaining power with providers due to a larger number of members served in a given market.

To access the full report, click here.