Anthem Agrees to Buy Cigna for $48.4 Billion

The Wall Street Journal

Anthem has agreed to buy Cigna for more than $48 billion, in a sign of continued consolidation in the U.S. health insurance industry. Here’s a look at the deal, which needs regulatory approval, and that would help reshape the health insurance industry.

The deal combines the second and fifth largest health insurers by revenue and merges two companies with a huge footprint in commercial insurance, the merged company is projected to have $115 billion in annual revenue and cover about 53 million people.

The tie-up of Anthem and Cigna further accelerates the rapid-fire reconfiguration at the top of the U.S. managed-care industry. The biggest companies are seeking more cost efficiency and scale as the health-care landscape changes because of the Affordable Care Act and other factors.

Anthem Chief Executive Joseph Swedish will remain CEO and add the chairman title, while Cigna CEO David Cordani will become president and operations chief. The role Mr. Cordani would hold in the combined company had been a sticking point in deal talks. Anthem estimates that the deal will grow its per-share earnings by 10% in the first year after closing, with accretion more than doubling by the second year.

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Anthem shareholders will own 67% of the combined company, while Cigna shareholders will hold 33%.  The deal follows by about three weeks Aetna Inc.’s agreement to buy Humana Inc. for $34 billion. In a sign of the takeover frenzy among big health insurers, Cigna also vied for Humana but failed to arrange a cash-heavy offer that Humana had requested, people familiar with the matter said.

The Big Three

The companies said they expect the deal, which will require regulatory approval, to close in the second half of 2016. There is no guarantee that regulators would bless the deal, and legal experts have said regulators are likely take a close look at the recent deals in the health-insurance industry.

Anthem, which is a Blue Cross and Blue Shield plan in 14 states, has a commanding presence, particularly in individual and small-employer plans, but also is a major player in serving large, multistate employers, which it does in partnership with other Blue-plan companies around the country.

Cigna is known for its focus on administering coverage for large employers, as well as a burgeoning overseas presence. With its 2012 acquisition of HealthSpring, Cigna also bolstered its Medicare business, which currently includes nearly 500,000 members. Anthem has 618,700 people enrolled in its Medicare Advantage plans, the private-insurer version of the federal program.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

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Kirk Reinitz, CPA
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