Mega-health deals bloom: Anthem bids $48 billion for Cigna

Anthem is buying rival Cigna for $48 billion in a deal that would create the nation’s largest health insurer by enrollment, covering about 53 million U.S patients.

In just three weeks, starting with Aetna’s $35 billion bid for Humana Inc. on July 3, the landscape of U.S. health care has been altered in a buyout frenzy that could transform five massive U.S. health companies into three, including UnitedHealth Group.

Larger insurers have negotiating power to squeeze better rates from drug companies and health care providers. But the wave of consolidation could lead to fewer choices for consumers in certain markets.

Regulators scrutinizing the two mega-deals 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.

Employer-sponsored health insurance is growing slowly and with the recent overhaul of the nation’s health care system, providers are jostling for the largest share of the millions of people who have signed up.

The deal announced Friday is valued at $54.2 billion including debt. Shareholders of Cigna, based in Bloomfield, Conn., will receive $103.40 per share in cash and 0.5152 shares of Anthem stock for each of their shares. The companies put the total value at $188 per share.

Anthem CEO Joseph Swedish said during a teleconference Friday that the combined company would “advance affordability, choice, access and quality.”

But the merger’s impact will take time to be felt by consumers, because insurers already have finalized most of their plans for coverage that starts in January.

Insurance industry consultant Robert Laszewski said insurers are bulking up to negotiate with bigger hospital systems, which are going through their own round of consolidation. The resulting “arms race” does not bode well for consumers.

“It means they have fewer choices and there isn’t much incentive for either side to really get more efficient,” Laszewski said. “Once they check each other they settle into this detente”

The American Medical Association, which represents U.S. physicians, voiced similar concerns Friday and called for close scrutiny by federal regulators.