Cigna has rejected Anthem's most recent merger offer.
The Supreme Court may have given health insurance companies more certainty on the Affordable Care Act, but merger speculation continues in the industry. Will the Big Five end up as the Big Three?
And what will that mean for consumers?
The last few months have seen rumors swirling around all of the big insurers, including Connecticut-based Cigna and Aetna. In fact, Cigna is the subject of the only confirmed takeover bid. Last month Anthem’s board appealed to Cigna’s shareholders after the Bloomfield company rejected a merger offer. Anthem has made four offers for Cigna over the past few weeks, but on June 21st it went public, without Cigna’s permission, about its desire to do a deal.
Cigna reacted angrily, releasing a letter which called the $54 billion dollar offer inadequate. Cigna also said it was deeply disappointed with Anthem taking the matter public, and refusing to address issues raised in recent merger talks. One of the biggest of those — who would head up a merged company. Cigna accused Anthem CEO Joe Swedish of wanting to take on four key roles for himself, leaving the position of Cigna CEO David Cordani uncertain.
On a conference call, Swedish seemed uncomfortable with the question. “I’ll simply say that I have a great deal of respect, not only for the CEO of that organization, but also for the management team in its entirety," he told analysts. "And I think collectively we will end up in a very good place by way of being able to conclude this transaction.” But since then, no announcement.
Anthem and Cigna are not the only insurers with a dance card to fill - Hartford’s Aetna has reportedly bid for Humana, as the industry grapples with the changes brought about by the Affordable Care Act.
Zack Cooper from Yale’s Heath Policy Office says all the talk of consolidation is partly to do with the new importance of Medicare Advantage plans, the fastest growing segment of the market, but also to do with changes in how healthcare is provided. “Hospital markets have grown more and more concentrated," he told WNPR. "Hospitals themselves are getting much more powerful, and my guess is that these insurers believe that they need to, in a sense, scale up, so that they have more power in negotiations with healthcare providers.”
Cooper said any consolidation does raise concerns that a more concentrated health insurance market could hike premiums for customers. Rexford Santerre, a professor of finance at UConn, agrees. “There’s a lot of studies now, academic studies, that show when the heath insurance markets become more concentrated we do see higher health insurance premiums, and there’s also some studies showing there’s fewer people with insurance, primarily individually purchased insurance.”
One of the big draws for any suitor for Kentucky-based Humana is the company’s large presence in the Medicare Advantage market - one of the fastest growing healthcare sectors. It’s been reported that Aetna is the preferred bidder for Humana, over Connecticut rival Cigna. But a deal that was rumored last week has so far failed to materialize.
