Monday, June 22, 2015

Health insurer Cigna rejects Anthem takeover bid - Modern Healthcare







Health insurer Cigna rejects Anthem takeover bid - Modern Healthcare



(Modern Healthcare)



Health insurer Cigna Corp. has rejected a $47 billion offer to be acquired by Anthem, a larger rival, saying the terms of the bid are inadequate and "woefully skewed in favor of Anthem shareholders."



Cigna's sharply worded rejection came just one day after Anthem went public with its cash-and-stock offer, which amounts to about $184 for each Cigna share or about an 18% premium on Cigna's closing stock price on Friday.



The proposed deal would make Anthem an even bigger giant in an industry that many see as ripe for consolidation, as insurers struggle to cut costs in the face of new regulations and technological advances. Anthem has said the combined companies would have annual revenue of more than $115 billion and provide insurance for about 53 million people.



Insurers view the increased scale as a primary way to boost earnings and diversify their products. The Affordable Care Act caps health insurance profits as a percentage of premium revenue. The insurers, along with some independent observers, also argue that getting bigger will enable them to leverage lower prices from providers, drugmakers and other industry players, thus saving money for employers and consumers. 



"How big is big enough ? "



Any insurance mergers almost certainly would face rigorous antitrust scrutiny from the U.S. Justice Department because of the colossal sizes of companies involved and the multistate impact. The Obama administration in the past has been critical of insurers' premium increases, and rate increases by bigger new entities could jeopardize the administration's cost-control efforts under healthcare reform.
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