In a very interesting and wonky Twitter discussion yesterday concerning the Aetna buy-out of Humana, there was a great discussion on the business case for Aetna. Is Aetna doing this to gain efficiency or market power? The immediate consensus is that there are not a lot of efficiencies to be gained by integrating Humana with Aetna. There are a few departments that are minimally scale variant, but most of the big Mega-Corporate workforce is closely tied to the size of the covered population. A merger for those workers just means the signature on their paycheck is different and their employer sponsored health insurance is different.
However, if I worked at Humana, my particular position would be at significant risk in two years. My basic job is to be an interface between the Big Idea Geniuses with their MBA buzzword bingo interspersed with interestingly misunderstood academic work grand ideas and the people who have to implement those ideas. I am allowed to give three responses to the BIGs —“Yes”, “Yes but we’ll need three times as much time and five times the budget and do we really want to shut down Big Project Y to meet your deadline…” and “If we’re going to blow $10 million dollars, let’s have some fun with it….” If Mayhew Insurance was merging with a competitor, that skill set is extremely valuable as we transitioned from our systems to our new overlords’ sysytems. After that, either my position is redundant or the mirror position at the new overlord is redudant. Insurance companies need a few of me once they have more than a few hundred thousand lives but they don’t need ten times of me at ten million covered lives.
There are a few other areas of immediate risk at Humana. Anyone in their marketing, product development and regulatory compliance groups for states where both Aetna and Humana operate should polish their resumes. Some of the analytics and finance teams may be at risk, but most of those teams are safe.
Most insurance company jobs would be safe. Customer service reps are still needed at the same scale for the same level of customer service reps. Medical management would still be busying managing chronic diseases, sales reps would still be pounding the pavement. Claims adjusters would still be revising and fixing claims. Complaints and Grievances would still be yelled at.
Most jobs at Humana would be protected because their role would be needed assuming the combined company does not lose membership. There are some jobs that could be eliminated (mine included if I was at Humana) but there is probably not a lot of needless redundancy at any level below the VP-level (the hookers and blow suppliers will be taking a hit though).
So from this angle, most of the business case for Aetna is market consolidation/rent collection.