We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Anthem's Pending Cigna Acquisition Under Fire in California
Read MoreHide Full Article
Clouds of uncertainty were cast over the pending merger between Anthem Inc. and Cigna Corp. (CI - Free Report) after concerns was raised by California Insurance Commissioner Dave Jones regarding the viability of the deal. Jones argued that the mega deal worth $48 billion would curb competition and hurt consumers in the state.
The acquisition will lead to market consolidation and greater concentration in the already saturated health insurance market in California. According to Jones’ office, in case the acquisition materializes, the new Anthem would control more than 50% of the market in 28 of the state’s counties and over 40% of the market in 38 counties. This would mean more power in the hands of the company, which will gain in size and scale.
Will Anthem Flex its Muscles Post Merger?
It is feared that the company, which already has a history of rejecting claims and insufficiently addressing consumer grievances, will bother even less to service its customers with more power in hand. It is also being contemplated that the insurer will have lesser incentive to improve the quality of its products and services, since it will vie against fewer and smaller players. The company may also hike premium and increase out-of-pocket costs, which will come directly from the pockets of its customers.
These concerns are not baseless. A $415,000 fine was imposed on Anthem by state health officials in May as the company failed to identify, timely process and resolve enrollees’ grievances. Naturally, this instills a fear that the company may repeat its high handedness in the future.
Moreover, the executives at Anthem did not give a clear reply when asked whether the company will pass on to its customers a portion of the $2 billion efficiencies flowing from the acquisition, in the form of lower prices.
The executives of the companies involved in the deal, however, have been defending their case from the very beginning by saying that the acquisition will help them to add scale to their business and eliminate unnecessary cost incurred in duplication of services provided to patients. They are also of the opinion that by gaining in size, they will be in a better position to negotiate with hospitals for claims and lower their overall administrative costs. Investment in technology from cost savings and expanded care by gaining quick access to new markets were the other advantages of the merger cited by them.
Past Consolidations by Insurers
The health insurance market in the United States has always been highly concentrated. Since 1996, the industry has witnessed acquisitions worth approximately $90 billion, resulting in dominance by just a few players. During 1990–2000, the industry witnessed approximately 400 big and small mergers and acquisitions (M&A). Consolidation and market dominance consequently led to a decline in competition.
Big insurers that dominated large markets, hardly ever bothered to provide even basic information to consumers, such as the performance of health insurance policies, procedures to claim, the size of the provider network and cancellation procedures. Moreover, in the absence of any reason to lower policy-holder costs, insurance companies went on raking in more profits year after year. Data from HealthReform.gov showed that the profits of the 10 largest insurance companies increased 250% between 2000 and 2009, 10 times faster than inflation. Consolidation among healthcare companies is leaving consumers with fewer choices and therefore more problems.
Another similar pending acquisition of Aetna Inc. with Humana Inc. (HUM - Free Report) worth $34 billion is also being very closely scrutinized by federal regulators.
Other parties – The American Medical Association and the American Hospital Association – have also contested the Anthem-Cigna merger. They have written to the antitrust division of the Justice Department asking to stop the merger.
Though the deal was approved by the shareholders of both companies back in Dec 2015, it will hit a rough patch with the antitrust regulators, with opposition flaring up now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Anthem's Pending Cigna Acquisition Under Fire in California
Clouds of uncertainty were cast over the pending merger between Anthem Inc. and Cigna Corp. (CI - Free Report) after concerns was raised by California Insurance Commissioner Dave Jones regarding the viability of the deal. Jones argued that the mega deal worth $48 billion would curb competition and hurt consumers in the state.
The acquisition will lead to market consolidation and greater concentration in the already saturated health insurance market in California. According to Jones’ office, in case the acquisition materializes, the new Anthem would control more than 50% of the market in 28 of the state’s counties and over 40% of the market in 38 counties. This would mean more power in the hands of the company, which will gain in size and scale.
Will Anthem Flex its Muscles Post Merger?
It is feared that the company, which already has a history of rejecting claims and insufficiently addressing consumer grievances, will bother even less to service its customers with more power in hand. It is also being contemplated that the insurer will have lesser incentive to improve the quality of its products and services, since it will vie against fewer and smaller players. The company may also hike premium and increase out-of-pocket costs, which will come directly from the pockets of its customers.
These concerns are not baseless. A $415,000 fine was imposed on Anthem by state health officials in May as the company failed to identify, timely process and resolve enrollees’ grievances. Naturally, this instills a fear that the company may repeat its high handedness in the future.
Moreover, the executives at Anthem did not give a clear reply when asked whether the company will pass on to its customers a portion of the $2 billion efficiencies flowing from the acquisition, in the form of lower prices.
The executives of the companies involved in the deal, however, have been defending their case from the very beginning by saying that the acquisition will help them to add scale to their business and eliminate unnecessary cost incurred in duplication of services provided to patients. They are also of the opinion that by gaining in size, they will be in a better position to negotiate with hospitals for claims and lower their overall administrative costs. Investment in technology from cost savings and expanded care by gaining quick access to new markets were the other advantages of the merger cited by them.
Past Consolidations by Insurers
The health insurance market in the United States has always been highly concentrated. Since 1996, the industry has witnessed acquisitions worth approximately $90 billion, resulting in dominance by just a few players. During 1990–2000, the industry witnessed approximately 400 big and small mergers and acquisitions (M&A). Consolidation and market dominance consequently led to a decline in competition.
Big insurers that dominated large markets, hardly ever bothered to provide even basic information to consumers, such as the performance of health insurance policies, procedures to claim, the size of the provider network and cancellation procedures. Moreover, in the absence of any reason to lower policy-holder costs, insurance companies went on raking in more profits year after year. Data from HealthReform.gov showed that the profits of the 10 largest insurance companies increased 250% between 2000 and 2009, 10 times faster than inflation. Consolidation among healthcare companies is leaving consumers with fewer choices and therefore more problems.
Another similar pending acquisition of Aetna Inc. with Humana Inc. (HUM - Free Report) worth $34 billion is also being very closely scrutinized by federal regulators.
Other parties – The American Medical Association and the American Hospital Association – have also contested the Anthem-Cigna merger. They have written to the antitrust division of the Justice Department asking to stop the merger.
Though the deal was approved by the shareholders of both companies back in Dec 2015, it will hit a rough patch with the antitrust regulators, with opposition flaring up now.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days.Click to get this free report >>