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Obamacare Prompts Anthem To Buy Cigna For Over $54 Billion

Friday foretold the dawning of the largest health insurer in the United States, as Anthem Inc. announced that it would buy Cigna Corp. for a whopping $54.2 billion. This does, however, create concern over a consolidation of power, as it marks the largest buy in health industry history.

Before this historic deal, there were four major insurers administering self-insured plans to major companies, reports Fox Business. There is Anthem, Cigna, UnitedHealth Group Inc and Aetna. Just three weeks back, Aetna purchased Humana Inc for $37 billion.

UnitedHealth was the largest insurer with 45.86 million members, however, this merger establishes total membership at 53 million between the combined companies — with $115 billion in annual revenue to boot.

According to the Los Angeles Times, these companies are attempting lower costs to cope with limits on profits due to Obamacare. Employers remain the primary source of coverage for most Americans, which is the biggest concentration of market power for Anthem and Cigna.

Paula Wade, an analyst at Decision Resources Group, has said that Anthem “dominates the employer-based insurance markets,” and that this new merger will leave employers “with even less choice than they have now.”

Anthem already dominates the employer-based insurance markets in 10 of the 14 states where it owns Blue Cross Blue Shield plans, and the addition of Cigna leaves employers in those states with even less choice than they have now.

All this has antitrust authorities in Washington in a ready to bounce state. Sen. Richard Blumenthal (D-Conn.), is in earnest when he says that these mergers must be “seriously scrutinized.” And Anthem hasn’t always had the best track record, consumer advocates and physician groups say they deserve the scrutiny for their past rate hikes, less than perfect service, and inaccurate provider lists.

These mergers must be seriously scrutinized to ensure that consumers and healthcare providers are protected from mega-insurer market power abuse.

Where this will lead is still not certain. Carl Tobias, a law professor at the University of Richmond, says “The Justice Department has been tough on some industries, but it’s difficult to tell if these health insurance issues will be deal breakers.”

In California the story is somewhat less about consolidation of power, and more about higher specialty drug costs and consolidation among physician groups, according to Peter Lee, executive director of the Covered California exchange.

Kaiser Permanente is California’s largest insurer with more than 7.3 million members. And as of 2013, Anthem is the second largest insurer with 6.1 million members. However, Cigna had 2.1 million members, with this new merger they would surpass Kaiser.

This new merger will be led by Anthem Chief Executive Joseph Swedish as chairman and chief executive, and Cigna Chief Executive David Cordani will be the no. 2 as president and chief operating officer. Swedish believes this acquisition will cut costs and bring in an estimated savings of $2 billion. According to him, this new deal will “transform healthcare and benefits for consumers.”

We believe we have got the right commitment to deliver an affordable healthcare coverage model. We will create a company that will transform healthcare and benefits for consumers.

What are your thoughts on the $54.2 billion acquisition?

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