Anthem Inc. (NYSE:ANTM) has received massive financial commitments to the tune of $26.5 billion as per its aim to be the biggest health insurer in industry history. The money is earmarked for financing the $48.4 billion buyouts of CIGNA Corporation (NYSE:CI) - one of the largest debt offerings pushing a takeover. The financial commitments put the deal in the rank of deals like Charter Communications, Inc. (NASDAQ:CHTR) at $31 billion and Actavis's $21 billion to acquire Time Warner Cable Inc. (NYSE:TWC) and Allergan respectively. The Cigna takeover is expected to be finished during 2016's second half, subject to regulatory approval.
The acquisition by Anthem is another wave of acquisition moving over the industry of healthcare, with the potential reduction of five largest insurers to three of them. UnitedHealth Group, the largest of them all will soon be overshadowed by the joining of Cigna and Anthem, with the latter together having 53 million members.
On other news, Aetna Inc. (NYSE:AET) has consented to purchase Humana Inc. (NYSE:HUM) for about $35 billion during the first few days of July, just after Centene Corp (NYSE:CNC) inked with Health Net, Inc. (NYSE:HNT) a $6.3 billion deal. The mergers are assisted by President Obama's 2010 era healthcare overhaul drive. This is being done by putting on tougher rules and restrictions on the profits of the industry.
On the other side, the acquisition by Anthem has caused ripples in its peer Blue Cross and Blue Shield plans. The ostensible reason is that a stronger Anthem can negotiate better contracts when it comes to probable national accounts, employers and also with other clients.
Since the rules of the association bars Anthem from showing the well-known Blue Cross and Blue Shield brand in the regions where the company does not possess the Blues plan or Blue Cross license, it is compelled to sell its health insurance products under different brands like the Amerigroup, competing for business against the Blues plans. According to Paula Wade of Decision Resources, this deal propels Anthem to direct competition against Blue Cross Blue Shield plans all over the US.
For Anthem, the company will add 14 million new members who were originally under Cigna health plans in states where the other Blue Cross members have a license to market under Blues brand. The list of such states includes Illinois, Texas and Florida where there are important corporate accounts. Analysts have applauded the Anthem deal as it helps to save costs and diversify the revenue sources. Longer term profitability will also be increased.