Skip to main content
Subscribe
  • Login
  • My Account
  • Logout
  • Register For Free
  • Subscribe
  • News
    • Current News
    • Providers
    • Insurance
    • Government
    • Finance
    • Technology
    • Safety & Quality
    • Digital Health
    • Transformation
    • ESG
    • People
    • Regional News
    • Digital Edition (Web Version)
    • Patients
    • Operations
    • Care Delivery
    • Payment
    • Midwest
    • Northeast
    • South
    • West
  • Blogs
    • AI
    • Deals
    • Layoff Tracker
    • HLTH 2024
    • Sponsored Content: Vital Signs Blog
  • Opinion
    • Letters
    • From the Editor
  • Events & Awards
    • Awards
    • Conferences
    • Galas
    • Virtual Briefings
    • Webinars
    • Nominate/Eligibility
    • 100 Most Influential People
    • 50 Most Influential Clinical Executives
    • 40 Under 40
    • Best Places to Work in Healthcare
    • Healthcare Marketing Impact Awards
    • Innovators Awards
    • Diversity Leaders
    • Leading Women
    • Best in Business Awards
    • The 2030 Playbook Conference
    • Innovations in Patient Experience
    • Leading Women Conference & Awards Luncheon
    • Leadership Summit
    • Workforce Summit
    • Best Places to Work Awards Gala
    • Diversity Leaders Gala
    • - Looking Ahead to 2025
    • - Financial Growth
    • - Hospital of the Future
    • - Value Based Care
    • - Looking Ahead to 2026
  • Multimedia
    • Podcast - Beyond the Byline
    • Sponsored Podcast - Healthcare Insider
    • Sponsored Video Series - One on One
    • Sponsored Video Series - Checking In with Dan Peres
  • Data & Insights
    • Data & Insights Home
    • Hospital Financials
    • Staffing & Compensation
    • Quality & Safety
    • Mergers & Acquisitions
    • Skilled Nursing Facilities
    • Data Archive
    • Resource Guide: By the Numbers
    • Surveys
    • Data Points
  • Newsletters
  • MORE+
    • Contact Us
    • Advertise
    • Media Kit
    • Jobs
    • People on the Move
    • Reprints & Licensing
    • Sponsored Content
MENU
Breadcrumb
  1. Home
  2. Finance
July 23, 2015 12:00 AM

Revival of Anthem-Cigna deal highlights insurers' lust for scale

Beth Kutscher
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print

    Cigna Corp. so far has rejected a tie-up with Anthem, but a deal may be only a matter of time given the growing need for scale in the health insurance market.

    The two companies are reportedly back at the bargaining table after Cigna rejected a June bid from Anthem. The new cash and stock offer is said to be about $188 per share, or about $48 billion, according to the Wall Street Journal and New York Times.

    Cigna had resisted Anthem's overtures despite what many see as a clear business case for size and scale in the post-healthcare reform environment. Insurers largely sat on the sidelines as healthcare providers rapidly consolidated across the country. Now the ball is in the insurers' court.

    This and other proposed insurance mergers could increase the pressure on independent healthcare providers, which are concerned about losing leverage in payment negotiations and being shut out of narrow networks.

    Although Anthem was the first to make a move with its June offer of $46.8 billion for Cigna, Aetna was the first insurance giant to cement a deal when it offered $37 billion for Humana earlier this month. Both deals are likely will face rigorous antitrust scrutiny before they are finalized. The two deals together could spur more M&A activity among both insurers and hospitals.

    Cigna has been in lengthy negotiations with Anthem about a combination, but it balked at the June offer. In a letter to Anthem's board, Cigna's chairman and CEO outlined several key obstacles to a deal. Cigna expressed concerns about who would govern the new company and that the proposal offers little benefit to Cigna shareholders.

    “You are, however, facing a number of major issues, including Anthem's lack of a growth strategy, complications relating to your membership in the Blue Cross Blue Shield Association and the related antitrust actions, and other significant challenges, such as the massive data breach you experienced in February,” the June 21 letter said.

    Cigna may be in a better negotiating position than other insurers because its focus has been on the large group market and not the more challenging individual market, said Eric Wilson, principal at Wilson Associates, a consulting firm.

    If Cigna is taken over by Anthem, it would be the 15th insurance company to leave the market since the Affordable Care Act was passed, either through a sale, divestiture, or going out of business, Wilson said. He pointed to companies such as Principal Financial, American Community, Guarantee Trust and Assurant Health as smaller players in the individual market that can no longer compete.

    The business environment has gotten more challenging for insurers with new regulations such medical-loss ratio requirements—which set a floor for how much insurers must spend on medical claims and clinical improvements—standard benefit packages, and prohibitions against turning away applicants based on preexisting conditions or setting much higher rates for older, sicker people. Those rules make it even more important for insurers to achieve economies of scale, get their administrative costs in check, and gain more bargaining leverage with providers and drugmakers.

    “I think when all is said and done, you're going to have three companies,” Wilson said. “They can't operate at these numbers and still make a profit.”

    Hospitals, meanwhile, fear that insurance mergers will put pressure on payment rates and decrease their bargaining power. That impact, however, is likely to depend on the market and could be remedied by divestitures, said Richard Zall, a New York-based attorney who chairs the healthcare practice at law firm Proskauer.

    The larger concern is that as big, powerful insurers increasingly adopt narrow network plans, some doctors and hospitals will be left out. Zall said the growing collaboration between insurers and providers on value-based payment and delivery reduces some of the tension. But as a smaller number of insurers roll out narrow network plans, providers face the risk “that the music stops and there isn't a chair for you.”

    Letter
    to the
    Editor

    Send us a letter

    Have an opinion about this story? Click here to submit a Letter to the Editor, and we may publish it in print.

    Recommended for You
    tariffs-healthcare-money-finance-0225
    How health system CFOs are navigating the growing uncertainty
    value based care integrated
    Evernorth, Optum, CenterWell units buoyed insurers in Q1
    Most Popular
    1
    Here are new state healthcare laws taking effect in 2025
    2
    Meet Modern Healthcare's 2025 Leading Women
    3
    New York-Presbyterian layoffs affect 2% of employees
    4
    Evernorth, Optum, CenterWell units buoyed insurers in Q1
    5
    Epic CEO Judy Faulkner on AI, antitrust and consolidation
    Sponsored Content
    Daily Finance Newsletter: Sign up to receive daily news and data that has a direct impact on the business and financing of healthcare.
    Get Newsletters

    Sign up for enewsletters and alerts to receive breaking news and in-depth coverage of healthcare events and trends, as they happen, right to your inbox.

    Subscribe Today
    MH Magazine Cover

    MH magazine offers content that sheds light on healthcare leaders’ complex choices and touch points—from strategy, governance, leadership development and finance to operations, clinical care, and marketing.

    Subscribe
    Connect with Us
    • LinkedIn
    • Twitter
    • Facebook
    • RSS

    Our Mission

    Modern Healthcare empowers industry leaders to succeed by providing unbiased reporting of the news, insights, analysis and data.

    Contact Us

    (877) 812-1581

    Email us

     

    Resources
    • Contact Us
    • Help Center
    • Advertise with Us
    • Ad Choices
    • Sitemap
    Editorial Dept
    • Submission Guidelines
    • Code of Ethics
    • Awards
    • About Us
    Legal
    • Terms and Conditions
    • Privacy Policy
    • Privacy Request
    Modern Healthcare
    Copyright © 1996-2025. Crain Communications, Inc. All Rights Reserved.
    • News
      • Current News
      • Providers
      • Insurance
      • Government
      • Finance
      • Technology
      • Safety & Quality
      • Digital Health
      • Transformation
        • Patients
        • Operations
        • Care Delivery
        • Payment
      • ESG
      • People
      • Regional News
        • Midwest
        • Northeast
        • South
        • West
      • Digital Edition (Web Version)
    • Blogs
      • AI
      • Deals
      • Layoff Tracker
      • HLTH 2024
      • Sponsored Content: Vital Signs Blog
    • Opinion
      • Letters
      • From the Editor
    • Events & Awards
      • Awards
        • Nominate/Eligibility
        • 100 Most Influential People
        • 50 Most Influential Clinical Executives
        • 40 Under 40
        • Best Places to Work in Healthcare
        • Healthcare Marketing Impact Awards
        • Innovators Awards
        • Diversity Leaders
        • Leading Women
        • Best in Business Awards
      • Conferences
        • The 2030 Playbook Conference
        • Innovations in Patient Experience
        • Leading Women Conference & Awards Luncheon
        • Leadership Summit
        • Workforce Summit
      • Galas
        • Best Places to Work Awards Gala
        • Diversity Leaders Gala
      • Virtual Briefings
        • - Looking Ahead to 2025
        • - Financial Growth
        • - Hospital of the Future
        • - Value Based Care
        • - Looking Ahead to 2026
      • Webinars
    • Multimedia
      • Podcast - Beyond the Byline
      • Sponsored Podcast - Healthcare Insider
      • Sponsored Video Series - One on One
      • Sponsored Video Series - Checking In with Dan Peres
    • Data & Insights
      • Data & Insights Home
      • Hospital Financials
      • Staffing & Compensation
      • Quality & Safety
      • Mergers & Acquisitions
      • Skilled Nursing Facilities
      • Data Archive
      • Resource Guide: By the Numbers
      • Surveys
      • Data Points
    • Newsletters
    • MORE+
      • Contact Us
      • Advertise
      • Media Kit
      • Jobs
      • People on the Move
      • Reprints & Licensing
      • Sponsored Content