Anthem reported today that it was buying rival Cigna for $48 billion in a deal that would create the nation’s largest health insurer by enrolment covering about 53 million US patients. Many are looking at the deal as a continuation of the consolidation in the health insurance sector. It was reported earlier this month that Aetana had bid $35 billion for Humana Inc and made many believe that the deal today would change the landscape of the US health care would be altered on the back of the buyout frenzy that could transform five massive US health companies into just three.
Larger insures have been negotiating power to squeeze better rates from drug companies and health care providers. But the wave of consolidation could lead to fewer choices for consumers in certain markets. Many believe that regulators scrutinizing the two mega deals will be trying to assess whether these combined companies would have so much power that they could dominate markets and drive already high health care cost even higher.
The deal announced today is valued at $54.2 billion including debt. Shareholders of Cigna will receive $103.50 per share in cash and 0.5152 shares of Anthem stock for each of their shares. The companies put the total value at $188 per share. Anthem CEO during a conference call said that the combined company would advance affordability, choice, access and quality. Insurance industry experts believe that insurers are bulking up to negotiate with bigger hospital systems which are going through their own round of consolidation. The merger’s impact would take time to be felt by consumers because insurers have already finalized most of their plans for coverage that starts in January. Analysts on the street are positive about the deal and believe it leads to higher efficiency and cost saving for both companies.