Anthem to purchase Cigna

If you’ve been trying to decide between a health insurance policy from Anthem or Cigna, you can stop worrying about it. Anthem is buying Cigna for $54 billion.

The biggest healthcare insurer in the US will be created by the historic deal, the largest in the sector. That compares with its most recent offer of $184 a share.

After nearly a year of negotiations, Cigna agreed to a deal that gives investors $103.40 in cash and about half a share of Anthem stock for each of their Cigna shares.

HCA Holdings Inc.is the biggest U.S. hospital operator with a market value of $39 billion.

Shares of Anthem were down 2.1 percent at $151.94 at 10:44 a.m.in New York.

Regulators scrutinizing the two mega-deals – Anthem/Cigna and Aetna/Humana – 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 costs even higher.

The third remaining health insurer is UnitedHealth, which just completed its own $12.8 billion acquisition of Catamaran, a pharmacy-benefits manager and prescription provider.

So for patients, insurers will say getting bigger means streamlining operations and more bargaining clout; so lower prices. Much of Cigna’s health insurance business is company self-insurance.

Five members of the Cigna board, including Cordani, will join the nine Anthem board members, creating a 14-person group to oversee the company.

Obamacare has meant more business for major insurers because more Americans have health coverage, but the law has also put more pressure on industry profits.

Anthem is the nation’s second-largest health insurer, while Cigna ranks fourth in terms of enrollment.

Anthem is parent to the well-known Blue Cross and Blue Shield plans in 14 states and a Medicaid plan called Amerigroup in 19 states.

The mergers are part of a changing national health care landscape that has employers reassessing the plans they are now offering their workers. Antitrust officials said prior to the wave of mergers that if the deals went ahead, it would be mindful of the effect that consolidation will have on the shape of the overall industry (rather than considering each deal in isolation). Anthem has more than 618,000 people enrolled in its Medicare Advantage plans, the private-insurer version of the government Medicare program for seniors. In addition, Cigna cited a “lack of growth strategy”, potential regulatory obstacles and a data breach disclosed by Anthem earlier this year as reasons why it rejected to the offer (California Healthline, 7/23).

Swedish will retain his titles of chairman and CEO of Anthem, while Cordani will become president and chief operating officer.

Blue Cross operators are not supposed to compete with one another, but Cigna does compete against Blue Cross members in a handful of states, which could cause controversy in the association.

The antitrust division of the U.S. Attorney General’s office and the Federal Trade Commission must approve these deals.