It’s official: Anthem announced this morning plans to purchase Cigna for more than $48 billion.
Coming on the heels of Aetna’s $37 billion proposed deal to acquire Humana, the Anthem-Cigna proposed merger, were it to be given the green light by regulators, would inevitably reshape the health-insurance landscape and provide employers with one less option to consider. But according to experts I spoke to earlier today, deals like the one announced this morning also have the potential of being a boon to employers and employees.
If the Anthem-Cigna transaction goes through, Anthem will have more than $115 billion in pro forma annual revenues, based on the most recent 2015 outlooks publicly reported by both companies. Anthem President and CEO Joseph Swedish would serve as chairman and CEO of the combined company and Cigna’s President and CEO David Cordani would take on the titles of president and COO.
Here’s Swedish’s take on the proposed merger …
“We believe that this transaction will allow us to enhance our competitive position and be better positioned to apply the insights and access of a broad network and dedicated local presence to the health care challenges of the increasingly diverse markets, membership, and communities we serve. The Cigna team has built a set of capabilities that greatly complement our own offerings and the combined company will have a competitive presence across commercial, government, international and specialty segments. These expanded capabilities will enable us to better serve our customers as their health care needs evolve.”
And Cordani’s take …
“The complementary nature of our businesses will allow us to leverage the deep global health care knowledge, local market talent, and expertise of both organizations to ensure that consumers have access to affordable and personalized solutions across diverse life and health stages and position us for sustained success.”
There’s been three national players for a while, with all three of them trying strengthen their portfolios through mergers, explained Tucker Sharp, global chief broking officer at Aon Hewitt in Somerset, N.J. “Someone can put out a headline that says, ‘Five carriers become three.’ But there really have been three national players and what’s happening here is really about building scale … .”
Sharp also noted that lately there’s a bit of merger one-upmanship going on between the carriers and providers. For some time now, he said, the hospitals and physician groups have quietly been merging to get the upper-hand in negotiating with the carriers. Now, much like “an arms race,” you’re seeing the insurer carriers trying to improve their leverage.
At the end of the day, he said, the operational efficiencies and greater scale gained from these mergers could lead to better deals with health providers and benefit employers.
When I asked Sharp if there’s anything HR leaders should be doing differently in light of the Anthem-Cigna news, he said nothing at the moment, noting it’s going to take time for things to work their way through the regulators. If you’re an HR executive, he added, there’s probably nothing you need to worry about for the rest 2015 and 2016.
I also asked Steve Wojcik, vice president of public policy at National Business Group on Health in Washington, for his assessment of the announcement.
His response: “There are some potential upsides and some potential downsides. In the end, we’re looking for some of the cost savings and pricing to trickle down to the employers and employees. But there also are obviously some concerns, because there are only a few players left standing—so employers that want to put their plan administration out to bid are going to have fewer bidders … .”
Wojcik predicts that the Aetna-Humana deal will probably meet less resistance from regulators than the Anthem-Cigna deal because Humana is a smaller player in the employer market, though a much bigger player in the Medicare market.
In evaluating these deals, he said, regulators need to factor in that the health insurance market is dynamic, not static. They’re going to need to weigh into their thinking, he explained, some of the new entities, such as accountable care organizations, that have emerged in recent years and the impact they’re having on the overall market.