Anthem-Cigna deal creates largest U.S. insurer

$54 billion deal follows mega-merger of Aetna and Humana this month

Anthem Inc. has agreed to acquire rival Cigna Corp. for $54 billion, creating the health insurance industry’s biggest company by enrollment.

The agreement announced Friday caps weeks of frenzied dealmaking in the health care sector.

Aetna Inc. reached a $37 billion deal for Humana Inc. this month. And Health Net Inc. agreed to be acquired by Medicaid insurer Centene Corp. for $6.8 billion.

The melding of Anthem and Cigna would create a company with about $115 billion in annual revenue and 53 million members. That would make it the largest U.S. health insurer in terms of membership, ahead of industry leader UnitedHealth Group Inc., which has 46 million members.

The Aetna-Humana combination would have about 33 million members, rounding out a dominant big three in the health insurance business.

Antitrust authorities are expected to closely scrutinize this new industry landscape. Some health policy experts and consumer advocates have expressed concerns about this increasing consolidation and the prospect of higher premiums.

“The Anthem-Cigna merger sets off numerous regulatory issues for state insurance regulators and the Federal Trade Commission,” said Paula Wade, an analyst at Decision Resources Group in Burlington, Mass., based on insurance markets in 10 of the 14 states where it owns Blue Cross Blue Shield, she said.

Anthem said it’s confident it can obtain the necessary regulatory approvals and expects the merger to close in the second half of 2016. “We believe this is the best transaction for both companies,” Joseph Swedish, Anthem’s chief executive, said in a conference call with investors Friday. “We will create a company that will transform health care and benefits for consumers.”

The Affordable Care Act has spurred much of the merger activity. Health insurers want to bulk up to better take advantage of rising revenues from the health law and the growing privatization of Medicare and Medicaid. The companies see consolidation as a way to lower costs and cope with limits on their profits under the new law. Anthem will pay $188 a share for Cigna. That’s up fromthe company’s previous offer of $184 a share that Cigna rejected last month.

The current cash-and-stock deal represents a 38 percent premium to Cigna’s closing price on May 28, when deal rumors sent many health insurance stocks soaring. The transaction’s total value of $54.2 billion includes debt.