Westward Ho! ? Major Insurance Provider Acquires Great-West Healthcare for $1.5B

Cigna Corp.’s health insurance empire is about to get appreciably larger.  The Philadelphia-based insurance company announced last week that it would pay $1.5 billion for Great-West Healthcare, expanding Cigna’s membership to nearly 12 million people.  Cigna is currently a top five U.S. insurer as measured by enrollments.  The deal is expected to close by mid-year 2008.

Increasing enrollment levels via M&A activity can provide leverage—much like a good ol’ plank under a broken wagon wheel on the Oregon Trail—for insurers when negotiating reimbursements for services with healthcare providers.  Consumers with Cigna-administered benefits will gain access to a larger network of providers and may profit from more affordable premiums based on the insurer’s ability to push for lower priced EKGs and similar procedures.

But that leverage (think “manifest destiny with a heaping dose of late capitalism”) in the hands of a rapidly expanding insurance company is seen by some as cudgel rather than a tool.

As Richard Haugh of the Colorado Hospital Association recently told The Denver Post, “Anytime these insurance plans consolidate their power so there are fewer choices, they start using their clout to beat down rates that hospitals can negotiate.”

From this perspective, insurance industry consolidation of the Cigna variety may eventually price some healthcare providers out of the market, sending small practices into oblivion on the wings of passenger pigeons.

In the face of geographic and market expansion by way of mergers and acquisitions, some physicians may have to pass the cost of shrinking margins associated with smaller reimbursements onto a patient population least able to afford higher medical expenses: Colorado’s more than 350,000 uninsured residents. 

From there, it doesn’t take a James Fenimore Cooper scholar to figure out that rising levels of uncompensated care (and few options for providers but to recoup costs anywhere they can) will lead to more medical bad debt, turning the benevolent promise of an insurer’s expansion “from sea to shining sea” into a trail of tears for many American healthcare consumers.