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Commentary

The Supreme Court ruling: What’s next for health care?

Jun 26, 2015

Is the market moving us to universal health care?

Following the Supreme Court ruling yesterday, Fortune’s Laura Lorenzetti reported that health insurers who provide insurance through the exchanges were “among the big winners from the Supreme Court’s Thursday decision to uphold Obamacare subsidies.”

The largest health insurers including UnitedHealthcare (unh), Aetna (aet), Cigna (ci), Anthem (antm), and Humana (hum) have been in merger talks over the last few weeks. Yesterday afternoon, the Wall Street Journal said, “Let the deal music play. In affirming a central tenet of the Affordable Care Act for the second time, the U.S. Supreme Court has removed a major source of uncertainty for the insurance industry. That is good news for investors banking on consolidation. Indeed, within hours of the decision, Humana stock popped on renewed talk that Aetna had made an offer.”

Indeed, one merger could happen as early as next week according to the New York Times, which is reporting that "A new round of consolidation in the health insurance industry appeared closer as companies seek to grow larger, driven in part by cost-cutting and opportunities that are part of the Affordable Care Act," noting that Humana "could reach an agreement by next week" with either Aetna or Cigna making the purchase.

The scope of the mergers could be huge and result in unprecedented health insurance giants. On June 16, Fortune’s Shawn Tully wrote that “In the merger world, no sector is hotter than health insurance” and that if UnitedHealth and Aetna “were combined today, they would rank fifth on the Fortune 500, leapfrogging the likes of AT&T, Ford, and Apple.”

But if the number of health insurers declines, the number available to a state’s consumers on the health care exchanges, which in some states is already very small, will shrink further—and provide even less choice to consumers. How could that be a good thing?

And how big do health insurers need to get to be efficient? Just one or maybe two players? The Economist has suggested that size does matter and that a health insurer must have scale and be gigantic to be efficient.

Perhaps the cat is out of the bag.

There already seems to be a renewed push to one provider following the ruling. Robert Weissman, president of Public Citizen, wrote in an email yesterday that “Health care is a right. Let’s make today’s Supreme Court victory the catalyst to finally getting the health care system the American people need and deserve—single-payer Medicare-for-All.”

But it is curious how the market, in the form of merger interest, seems to be marching in that direction more quickly than government. Then again, maybe the market's moves are not so surprising when we consider that a single-payer system is what is working for people in the U.S. who are over 65 (with Medicare)—and it's what works well in many countries around the world.

With all this merger talk, the market may be telling us something if we would only put our ideologies aside and listen. Perhaps the market is suggesting that providing the nation's health insurance is really akin to a natural monopoly—and that rather than a benefit, providing consumer choice is wasteful—and that a single-payer system is actually the best way to provide this public good with maximum efficiency.

Eleanor Bloxham is CEO of The Value Alliance and Corporate Governance Alliance (http://www.thevaluealliance.com), an independent board education and advisory firm she founded in 1999. She has been a regular contributor to Fortune since April 2010 and is the author of two books on corporate governance and valuation.

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