The proposed acquisition, the health insurance industry’s largest, comes three weeks after Aetna Inc agreed to buy Humana Inc for US$37 billion.
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Health insurers have been in a race to consolidate, arguing that being larger would help them negotiate better prices with doctors and hospitals as well as cut administrative costs following President Barack Obama’s signature healthcare law that was passed in 2010. But it will lead to a reduction in choices for consumers in a few markets.
The health care insurance industry’s consolidation rush is accelerating with insurance giant Anthem’s(ANTM) deal to acquire Cigna (CI) in a deal valued at $54.2 billion. Further, Goldman Sachs analysts said antitrust regulators might already consider the market for large, multi-state insurers on the edge of being too concentrated (Wall Street Journal, 7/24).
Although these are big national companies, health care is also fundamentally a local business.
Sharp said that because of Obamacare restrictions, insurers lack the power to raise prices when they want.
Yet there is much concern about whether or not any savings insurers make from growing in size will be passed on to customers.
Federal and state regulators are likely to scrutinize both of the deals closely, although the companies have argued that the mergers will benefit consumers.
Data and technology are playing a growing role in monitoring patients and care. At a very basic level, that means things like tracking whether patients are keeping up with their immunizations. It also created new benefit and coverage rules and required insurers to spend more of their premium dollars on coverage.
Under the ACA’s “individual mandate”, most people who are not insured through their employer or a government program such as Medicare or Medicaid must obtain insurance or pay a significant tax penalty.
How an Anthem purchase of Cigna could affect Indianapolis is hard to say, without knowing how such a deal would be structured.
Another factor in the two insurance megadeals announced this month is a grab for a bigger share of the market for lucrative, privately run Medicare Advantage plans.
In addition, with the merger, Anthem could face issues because of its status as a Blue Cross Blue Shield Association licensee.
A spokesman for Anthem said Friday that the company manages no insurance plans in Arkansas.
An Anthem spokeswoman did not respond to a request to comment.
US healthcare firm Anthem said it would pay $54bn (£35bn) to buy smaller rival Cigna in a move aimed at slashing costs.
Cigna is mainly known for its administration of coverage for large employers.
Expected to close in the second half of 2016, if the deal passes state regulatory approvals and other requirements, the merged insurer would cover 53 million members.
“They obviously gave some on the governance side, but increased the percentage of stock in the transaction, which is less attractive for the Cigna shareholders”, Steve Halper, an analyst at FBR, said by phone.
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Anthem stockholders will own about 67 percent of the combined company, with Cigna shareholders owning approximately 33 percent.
