Insurers choose their partners. So how big will the dance floor be?

Handshake M&A mergers promotion
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Aetna and Humana have announced a $35 billion cash and stock agreement to merge, one day after Centene indicated it planned to buy its Medicaid-focused rival Healthnet for $6.8 billion.

Should Anthem and Cigna eventually reach a deal to combine their businesses, it will mark one of the most significant eras of consolidation in the history of the health insurance sector.

Yet the question remains whether regulators will embrace the deals as quickly as these rivals have embraced one another. Four of the largest U.S. insurers will combine to form two health-care powerhouses, and the competition may spur more mergers among smaller players.

"The effect is going to be very specific to markets," said Christopher Koller, the president of the Milbank Memorial Fund, a health policy research foundation that advises states.

Read MoreAetna to buy Humana for $37B in cash and stock

"What the [Federal Trade Commission] will want to determine is, does an insurer have a big enough market share in a particular market so as to eliminate or reduce competition," asked Koller, who served as Rhode Island's health insurance commissioner from 2006-2013.

Still, Koller argues that when it comes to insurance the bar has been set fairly high by federal regulators.

"I regulated a market where a domestic, local, non-profit (Blue Cross plan) had 60-70 percent of market share. And I certainly didn't have the FTC marching in there trying to take it apart," he said.

Yet current Rhode Island Health Insurance Commissioner Kathleen Hittner said these new large insurer deals should be carefully scrutinized because it could hurt the burgeoning consumer market.

"People want consolidation for efficiency, which is what (insurers) promote," said Hittner. "If you have competition, they look at the other plans and they try to have similar plans," she said.

"I think if you take away that competition, we will see higher rates and we will see less ability for the states to adjust those rates," she added.

How concentrated is the market?

Mark Bertolini, CEO of Aetna at 2015 WEF in Davos, Switzerland.
David A. Grogan | CNBC
Mark Bertolini, CEO of Aetna at 2015 WEF in Davos, Switzerland.
"It is very dynamic out there in marketplace. We have to, from the consumer side, be vigilant about what's happening.." -Elizabeth Imholz, director of special projects and advocacy at Consumers Union

With nearly 5 million members, Humana's dominant position in Medicare plans is one of the factors that attracted Aetna to purchase its smaller rival. If the deal is approved, the combined firm would have greater than 50 percent market share in Medicare in more than half a dozen states, according to a recent analysis by Susquehanna Financial Group.

That would make one area where regulators may raise concerns, which some analysts say could be solved by either company selling off chunks of its business.

"We expect the deal will close with divestitures in pockets to address anti-trust scrutiny," wrote Ana Gupta, a health-care analyst at Leerink in a note to clients. Gupta raised her price target on both Aetna and Humana following Friday's announcement. However, she noted that regulatory approvals for the merger would take time, as would expected cost savings.

"The deal is expected to generate cost synergies of $1.25 billion in 2018 and estimated closing in second half of 2016," Gupte wrote.

Consumer concerns

Humana-Aetna make sense?
Humana-Aetna make sense?   

Aetna's chairman and CEO Mark Bertolini said in a statement that the combined company will be able to reduce overhead costs and pass on better rates to their customers.

"This combination will allow us to continue to invest in excellent service for our members and strengthen our partnerships with providers to deliver high quality care at an affordable price," he added.

That may be easier said than done, advocates say, and is largely dependent on how robustly regulators look at the deal's impact on consumers.

"Greater consolidation could lead to improved efficiencies," said Elizabeth Imholz, director of special projects and advocacy at Consumers Union, but only "if we had a really effective rate review and antitrust system in place that could look at the antitrust considerations and also closely scrutinize rate filings by insurance companies."

While the Affordable Care Act triggers government review for rate increase requests of more than 10 percent, insurance regulatory scrutiny at the state level varies widely, Imholz said. She hopes federal regulators will watch the proposed deals closely.

"I don't see how the FTC could look the other way if these big insurer [deals] are proposed, because it's of great public import," Imholz said. "Even one big one would be important for them to look at."

One of the arguments insurers make for consolidation is to counter the wave of deal-making in the hospital and medical provider sector, which has given some players tremendous concentration and market power.

Over the last 10 years, the number hospital deals have outpaced insurance acquisitions by six to one on average, according to data from S&P Capital IQ.

Insurance industry consultant Robert Laszewski said he expected strong pushback from doctors and hospitals against the large insurer mergers.

"I think there'll be huge opposition from the provider industry. I think that's what the analysts are missing," said Laszewski, president of Health Policy and Strategy Associates.

"There would be so much market clout gain that I think it would concern people from a competition standpoint, and raise the ire of the hospital and physician lobby," he added.

Consumers will want to be vocal, as well, said Imholz. "It is very dynamic out there in marketplace," she said. "We have to, from the consumer side, be vigilant about what's happening."

(CORRECTION: An earlier version of this story misstated Elizabeth Imholz's name.)