The Wall Street Journal broke news on Monday that Anthem, the nation’s second largest insurance company made a takeover offer to Cigna Corp, the fifth largest insurer. Cigna declined the offer and the company’s stock spiked from $137.50 per share to $152 on the New York Stock Exchange. While that news was the first actual merger offer, most of the other top companies have possible deals of their own.
Reports and rumors are circulating that top insurance company, UnitedHealth Group, is considering a merger with Aetna Inc., ranked third among health insurers. Fortune noted that a UnitedHealth-Aetna would become number 5 on the Fortune 500, topping Apple. Such a merger would give the combined company better leverage in negotiating prices with hospitals and physician groups.
The Los Angeles Times reports that other top insurers are engaging in talks with Humana Inc. Humana has a strong position in the marketplace with Medicare Advantage health plans for older adults. The proportion of older adults continues to grow, which has made a merger with Humana valuable. Larger insurers, including Anthem, Aetna, and Cigna are reportedly discussing mergers with Humana.
Despite reports of possible mergers and enthusiastic investor speculation, the insurance companies have reasons to hesitate. The insurance players may wait to take action until the Supreme Court has ruled on King v. Burwell, the latest challenge to the Affordable Care Act.
The Supreme Court debate centers on constitutionality of subsidies designed to make health plans affordable. If the Court rules against the subsidies, then more than 6 million people in 34 states may become unable to afford insurance. Such a defeat would damper insurance companies’ enthusiasm for mergers.
