(Bloomberg) — With Thursday’s Supreme Court ruling on King v. Burwell out of the way, health insurers and hospitals can get back to making deals.
The court’s 6-3 ruling on the Patient Protection and Affordable Care Act (PPACA) case keeps PPACA premium tax credit subsidy money flowing to more than 6 million people who have used the PPACA exchange system to buy health insurance. That means more paying customers for hospitals and insurers and lifts a cloud hanging over the health care sector.
Uncertainty over the case “was the biggest obstacle to M&A that existed in the health care industry,” said Bill Bithoney, a managing director in the consulting firm BDO USA’s health care advisory practice. “People didn’t know what was going to happen.”
Now that they do, consolidation may speed up. Aetna Inc. (NYSE:AET) is said to be nearing an acquisition of Humana Inc. (NYSE:HUM), Bloomberg reported Thursday after the court ruling. And on June 20, Anthem Inc. (NYSE:ANTM) went public with a bid for Cigna Corp. (NYSE:CI).
Among large insurers, Aetna and Humana had the most riding on the court’s ruling, said Ana Gupte, an analyst at Leerink Partners. As much as 2 percent of their 2016 earnings were at stake, she estimated.
If deals for Humana and Cigna are consummated, the U.S. would be left with three giant health insurers in control of much of the market. So far, Cigna has rejected Anthem’s $184 cash-and-stock bid, and said its concerns included governance and a data breach at Anthem. Anthem has said it still wants to do a deal.
The exact terms of Aetna’s offer for Humana weren’t reported. Representatives of Aetna and Cigna declined to comment on Thursday. A Humana spokesman didn’t return requests for comment.