Industry giant Anthem Inc. reached a $ 54-billion deal to buy rival Cigna Corp., creating the country’s biggest health insurer and triggering concerns about the immense power it could wield with employers and medical providers.
The merger announced Friday capped weeks of frenzied deal-making that could result in Anthem, along with just two other major companies, dominating the U.S. health insurance business. Anthem’s move and a recent deal by Aetna Inc. are sure to face intense scrutiny from government regulators worried that this consolidation could drive up premiums for businesses and consumers.
"These mergers must be seriously scrutinized to ensure that consumers and healthcare providers are protected from mega-insurer market power abuse," said Sen. Richard Blumenthal (D-Conn.).
The melding of Anthem and Cigna would create a company with $ 115 billion in annual revenue and 53 million members — nearly 1 in 5 Americans.
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.
Aetna announced this month it’s buying rival Humana Inc. for $ 37 billion, and together they would have about 33 million members.
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 growing enrollment of Medicare and Medicaid patients.
The companies see consolidation as a way to lower costs and cope with limits on their profits under Obamacare.
Anthem Chief Executive Joseph Swedish touted the Cigna acquisition as a way to eliminate unnecessary costs and offer more affordable benefits. Anthem has projected at least $ 2 billion in potential savings from cutting duplication in sales and administration, among other areas.
Anthem may also use its increased clout to exact lower prices from hospitals, doctors and drug makers. Those healthcare players have been undergoing a similar consolidation wave on their side of the ledger.
Anthem said it’s confident it can overcome its critics and win the necessary regulatory approvals to close the purchase in the second half of 2016.
"We believe we have got the right commitment to deliver an affordable healthcare coverage model," Swedish said in a conference call Friday with analysts.
"We will create a company that will transform healthcare and benefits for consumers."
But health-policy experts warn that there’s no guarantee that savings will get passed along to consumers.