Anthem (Photo : Reuters)
A planned acquisition by health insurer Anthem of the Cigna Group would create the biggest health insurance company in the U.S. valued at $48.3 billion. It would dwarf the buy-in by Aetna of Hamana for $37 billion, announced a few weeks ago.
According to Standard Daily, the corporate wedding between Anthem and Cigna is expected to happen in the later part of 2016, depending on its securing approval for state regulatory agencies. With a projected total customer base of 53 million, the new health insurance giant would result in the insurance market having on three major players. These are Anthem, UnitedHealth Group and Aetna.
UnitedHealth is currently the market leader with 45.86 million members. Besides displacing UnitedHealth for the number one spot, the planned merged firm would also enjoy $115 billion annual revenue, estimates Immortal.
This situation runs the risk of insurance premiums becoming higher, warns Thomas Greaney, health and antitrust law professor at the Saint Louis University. His warning is echoed by the American Medical Association which issued a statement that said: "The lack of a competitive health insurance market allows the few remaining companies to exploit their market power, dictate premium increases and pursue corporate policies that are contrary to patient interests."
But Leerink Partners analyst Ana Gupte said the merging firms would face regulatory scrutiny and may be required to divest and make concessions to consumers to be allowed the corporate wedding.
The two mergers aim to lower the cost of health insurers because of the limits on profits set by Obamacare, according to the LA Times. Anthem and Cigna has employers as its primary source of coverage. If their merger is approved by regulators, employees "would have less choice than they have now," foresees Decision Resources Group analyst Paula Wade.
Under the planned merger, Joseph Swedish, chief executive of Anthem, would become chairman and chief executive, while David Cordani, chief executive of Cigna, would become president and chief operating officer.
