HR Administration

Anthem to Buy Cigna in $54 Billion Deal

By Rick Bell

Jul. 24, 2015

Updated July 24, 2015 at 11 a.m. CT

In yet another move consolidating the health care insurance industry, Anthem Inc. said on July 24 that it will acquire rival Cigna for $54.2 billion. 

The announcement follows on the heels of insurance giant Aetna Inc.’s July 3 announcement that it plans to acquire Humana Inc., the smallest of the big five insurers, for $37 billion. A day earlier, health insurer Centene Corp. said it will buy smaller rival Health Net for $6.3 billion and on June 30 a merger deal was announced between Willis Holdings Corp. and Towers Watson & Co. for $18 billion. 

The announcements come in the days and weeks after the landmark U.S. Supreme Court decision to uphold subsidies for individuals under the Affordable Care Act. The deals also underscore the industry’s rush to grow in order to attract new customers as well as negotiate better deals with suppliers and hospitals. According to a story in Modern Healthcare, if the Anthem-Cigna deal is approved by regulators, it would be the 15th insurance company to leave the market sice the ACA was passed either through a sale, divestiture, or going out of business.

Gary Kusher, president and CEO of benefits consultancy Kushner & Co. and a regular contributor to Workforce, said the announcement didn't come as much of a surprise given months of rumors yet is something of a double-edged sword.

"It's probably both a positive and negative," Kusher said via email. "On the plus side, ever-larger risk pools should better enable cost controls. Of course, with only three dominant players nationally after this deal, there will be fewer choices in the marketplace."

Kushner added that unlike doctor-hospital consolidations attributable to the ACA's rules on accountable care organizations, or ACOs, the Anthem deal and previous acquisitions weren't fueled by the ACA. 

"It is a result of health carriers recognizing that without ever-increasing volume, maintaining properly priced risk pools is a tricky endeavor," Kushner said. 

     

According to published reports, Anthem-Cigna would have estimated revenue of about $115 billion and serve more than 53 million people. Under terms of the deal, Anthem said it would pay $188 per share in cash and stock. Pending regulatory approval, the deal is expected to close later this year.

Check back with Workforce for updates on this story.

   

doctor-hospital 
Rick Bell is Workforce’s editorial director. For comments or questions email editors@workforce.com.

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