WellPoint's Deal for Amerigroup Is Landmark 'Obamacare' Merger

In late June, the court confirmed the Act's ability to force Americans to carry health insurance and compel insurers to cover people with pre-existing health conditions. The Supreme Court, however, limited the extension of Medicaid, deeming it unconstitutional for the federal government to withhold money from states that don't comply with the Act.

The Supreme Court's maintenance of the Affordable Care Act signals that Medicaid will expanded to some extent -- with the biggest impact to Medicaid HMOs like Amerigroup, Molina(MOH) and Centene(CNC) .

Nevertheless, for companies tied to health care plans subsidized by Medicaid and other government programs or unsubsidized private market plans for corporations and individuals, Cabrera said he sees a relatively similar set of challenges to grow their scale and earnings, regardless of how the Supreme Court ruled.

Companies will be pressured to figure out a way to grow the bottom-line in a health care market that's likely to become far more cost-competitive. "We do not see that the cost trend today is sustainable, therefore to be a winner in the future you need to be bigger and have economies of scale," said Cabrera.

Recent deals like dialysis specialist DaVita's(DVA) $4.42 billion acquisition of privately held physician practice HealthCare Partners and health-insurer Humana's(HUM) acquisition of hospital chain Concentra in 2010 highlight how health care sector players are scaling their operations, noted Cabrera.

According to preliminary Dealogic second-quarter M&A data, the health care sector represented the third most active market for mergers, surpassed only by the tech and energy sectors.

DaVita's growth in the dialysis market and a similar market share held by German giant Fresenius Medical Care(FMS) makes additional large-scale consolidation in that piece of the health care sector less likely. Fresenius cut one of the largest health care deals of 2011, when it bought Liberty Dialysis Holdings for $1.7 billion. Big consolidation efforts in the PBM space are also challenged after CVS Caremark(CVS) and Express Scripts(ESRX) cut transformational deals in recent years.