Health insurers weigh mergers
Another consolidation wave may be coming to the health insurance industry, with Anthem Inc. playing a major role.
Analysts have pegged Anthem as one of three potential bidders for Humana Inc., which is prized for its big presence in the Medicare Advantage program.
Then Monday, the Wall Street Journal reported that Anthem had made a bid for Cigna Corp., the nation’s fifth-largest health insurer by enrollment. Aetna Inc. has also expressed interest in Cigna, according to multiple reports.
Amid the speculation, analysts agree the health insurance industry is ripe for consolidation.
“Like many industries, we think the managed care industry will evolve to a Big 3,” said Ana Gupte, a healthcare analyst at Leerink Partners. “One of the reasons that we think a wave of consolidation is overdue is that we view the industry as being too fragmented.”
Gupte said if Anthem loses out on Humana, then a deal for Cigna might be more likely.
A spokeswoman for Anthem said the company wouldn’t comment on rumors or speculation.
Shares of Anthem closed up $3.75, or 2.3%, at $164.46. Cigna shares shot up $16.12, or 11.7%, to $153.43.
Anthem is the largest for-profit health insurer in California and its Blue Cross plans lead enrollment in the state’s Obamacare exchange. The Indianapolis-based company also sells policies in 13 other states.
Anthem had annual revenue of $73 billion and profit of $2.6 billion last year. It had 38.5 million members in March, second only to UnitedHealth Group Inc.
A merger wave in the industry could also sweep up Woodland Hills insurer Health Net Inc. and Long Beach insurer Molina Healthcare Inc.
Both of those mid-sized companies could draw interest for their experience in Medicaid managed care, a growing business under the health law expansion.
The first domino in the industry deal-making has figured to be Humana, the nation’s second-largest provider of Medicare Advantage plans. Those privately run versions of Medicare are seen as a key growth market as baby boomers retire. Humana said it wouldn’t comment on the speculation surrounding an acquisition.