Next year Aetna will no longer offer coverage in 11 of the 15 state exchanges where it currently sells Obamacare plans. Its action follows similar decisions by UnitedHealth Group, the country's largest health insurer, and Humana, another of the country's five largest.
All these insurers claim they're not making enough money as a result of "adverse selection," meaning not enough healthy people are signing up for the Obamacare exchanges while too many people with serious health problems are enrolling.
At the same time, health insurers are now merging with or buying one another. Aetna is trying to buy Humana and Anthem wants to buy Cigna. They say they're doing this in order to obtain economies of scale that will reduce costs. But that's misleading. Studies show that cost savings from consolidations, mergers and asset buyouts are only short-term benefits. Any overall operating synergy depends on whether the surviving entity enhances several other capabilities. Rather than cost savings, synergy typically results when the new entity either obtains greater pricing power, combines different functional strengths with the acquired company, and/or achieves higher growth in new or existing markets.
