Anthem and Cigna have entered into a definitive agreement whereby Anthem will acquire all outstanding shares of Cigna in a cash and stock transaction. The Anthem board of directors will be expanded to 14 members. David Cordani and four independent directors from Cigna’s current board of directors will join the nine
Joseph Swedish, president and CEO of Anthem said, “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. “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,” said David M. Cordani, president and CEO of Cigna. The transaction is expected to close in the second half of 2016, pending state regulatory approvals. Anthem is confident in its ability to obtain all necessary regulatory and other approvals.
Insurance Commissioner Dave Jones said, “California’s health insurance market already suffers from consolidation with the four largest health insurers in the individual market controlling more than 85% of the market. Further consolidation will result in even less competition among health insurers and will leave consumers and employers with fewer choices and the potential for greater premium increases. Studies of prior mergers of health insurers found that health insurance prices increased as a result of mergers. “Health insurers are enjoying record share values and profits, which are paid for by consumers and employers. There is no requirement that any savings from these mergers be passed along to consumers or employers. In California, there is no authority to reject excessive health insurance rate increases, unlike 35 other states. We will review the mergers based on what is best for California consumers and employers. We will also work closely with other state and federal regulators,” he added.
Steven Stack, MD, president of the American Medical Association said, “The lack of a competitive health insurance market allows the few remaining companies to exploit their market power, dictate premium increases, and pursue corporate policies that are contrary to patient interests. Health insurers have been unable to demonstrate that mergers create efficiency and lower health insurance premiums…The U.S. Department of Justice has recognized that patient interests can be harmed when a big insurer has a stranglehold on a local market. Federal and state regulators must take a hard look at proposed health insurer mergers. Antitrust laws that prohibit harmful mergers must be enforced and anti-competitive conduct by insurers must be stopped.” “Based on federal guidelines, the proposed Anthem-Cigna merger would be presumed to be anticompetitive in the commercial, combined (HMO+PPO+POS) markets in nine of the 14 states (NH, ME, IN, CT, VA, CO, GA, NV, KY) in which Anthem is licensed to provide coverage,” he added.
An AMA study of the 2008 merger involving UnitedHealth Group and Sierra Health Services found that premiums increased after the merger by almost 14% compared to a control group. The study reveals a serious decline in competition among health insurers with nearly three out of four metropolitan areas rated as highly concentrated. In fact, 41% of metropolitan areas had a single health insurer with a commercial market share of 50% or more.