Dive Brief:
- The New York Times reports today that a massive healthcare insurance deal is now final. Health insurer Anthem has agreed to acquire Cigna that values its rival at $54.2 billion, the latest in a consolidation push among the United States’ biggest health insurers.
- The deal comes just weeks after Aetna agreed to acquire Humana, the smallest of the big five insurers, for $37 billion in cash and stock. If both transactions are completed, they will shrink the number of major health insurers in the United States to three, the Times reports.
- A combined Anthem-Cigna would have estimated revenue of about $115 billion and serve more than 53 million people with medical coverage. Under the terms of the deal, Anthem said it would pay $188 a share in cash and stock, representing a 38.4% premium to Cigna’s closing price on May 28, before news of Anthem’s interest emerged.
Dive Insight:
According to the Times report, the merger push among health insurers comes as they look to gain greater size to reduce costs and capitalize on growing opportunities in the government and individual markets. Plus, the appetite for deals among insurers was recently whetted by the Supreme Court’s upholding of the portion of the Affordable Care Act that subsidizes consumers who buy policies through the government’s online marketplace.
Tucker Sharp, global chief broking officer of Aon Health, says that with rapid consolidation in the health provider space, carriers are feeling pressure to maintain their position in the game. Combining forces enables carriers to create operational efficiencies and greater scale to leverage better deals with health providers.
"This could ultimately results in lower costs for consumers, as well as improvements in quality of patient care," Sharp adds. But in the short term, there will be a lot of scrutiny from the Department of Justice and state regulators on these proposed deals. Sharp says it will be important for employers to follow these developments closely before determining how this merger may impact their health plans and longer-term health strategies.
