Health in­sur­ers weigh merg­ers

Los Angeles Times - - BUSINESS BEAT - By Chad Ter­hune chad.ter­hune@latimes.com

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.

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