Wednesday, November 28, 2007

The Last One is Gone--CIGNA Buys Great West Life Health Insurance Business

The recent announcement that CIGNA has purchased the U.S. health insurance business of Great West Life for $1.5 billion in cash struck me as more than the minor headline it was back on page C5 of the Wall Street Journal.

The last one is now history.

Metropolitan, Prudential, John Hancock, Mass Mutual, Hartford, Pacific Life, Phoenix Mutual, and so many more, are all out of the medical business.

I remember well the effort Great West led in the mid-1980s to create a nationwide PPO platform for mid-sized carriers that became Private Health Care Systems (PHCS) in order to compete with the emerging threat the new managed care organizations posed. In fact, I was the first group executive to throw a million dollars into the Great West hat to start it. It sounds funny today to say that our original goal was to put a national network together that would rival the size of John Hancock's then medical business.

The twenty-year fundamental shift in the health insurance markets from the large and mid-sized traditional carriers operating on nationwide indemnity platforms to the new and much larger and market focused managed care organizations would now appear to be complete.

You could argue that only Aetna and CIGNA made the turn. But after the U.S. HealthCare merger, one can also argue that it isn’t the old Aetna that survives today.

After all the change, it is not a little bit ironic that the big, often Wall Street dominated, managed care companies have regressed to something not all that different from the volume sensitive indemnity model they displaced.

Must be lots of old group folks selling real estate.
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