Latest Blogs
-
Kim and Todd Saxton: Go for the gold! But maybe not every time.
-
Q&A: What you need to know about the CDC’s new mask guidance
-
Carmel distiller turns hand sanitizer pivot into a community fundraising platform
-
Lebanon considering creating $13.7M in trails, green space for business park
-
Local senior-living complex more than doubles assisted-living units in $5M expansion
Anthem Blue Cross and Blue Shield already dominates the health insurance market in Indiana.
But if Anthem merged with Cigna Corp., it would create a behemoth that provides health benefits to three out of every five Hoosiers that buy insurance on their own or receive employer-sponsored insurance.
Anthem has made a $45 billion takeover bid for Connecticut-based Cigna, according to an unnamed source cited by the Wall Street Journal. Cigna, however, has rebuffed that offer, which was said to be for $175 per share.
If Anthem does reel in Cigna, it could help Anthem’s health plan in Indiana extend the deep discounts it receives from health care providers to even more people and companies. But it also means it could take a bigger bite out of revenue for Indiana’s hospitals, doctors and other health care providers.
"An ANTM-CI combination would create a massive commercial player," Deutsche Bank analyst Scott Fidel, referring to Anthem and Cigna by their ticker symbols, wrote in a note to investors Monday. However, he also noted that the deal would not provide much help for Anthem to reach its goal of growing its government-sponsored health plans.
Cigna provided health benefits to 362,000 Hoosiers in 2014, according to market research firm HealthLeaders-InterStudy. That ranked third statewide for enrollment in commercial health plans, behind Anthem’s 1.5 million and UnitedHealthcare’s 409,000.
The vast majority of those were employees at companies that insure themselves, but hire Cigna or its Sagamore Health Network for the discounts they have negotiated with providers. One of Cigna's largest Indiana clients is the St. Vincent Health hospital system.
“If these other networks were purchased and improved by Anthem, this would be a positive for consumers,” wrote Andy Kaelin, an Indianapolis human resources consultant at the firm KBIC Results, in an e-mail. “For years one of the major, positive considerations for utilizing the Anthem network was for the increased discounts associated with it. If similar discounts could be harvested through the alternative Cigna/Sagamore networks, that could help a lot of employer groups.”
Trouble is, it could also put further pressure on hospitals and doctors. Anthem always asks for and almost always gets the lowest prices from providers. How much is a closely guarded secret by both Anthem and the providers.
But health care providers are being paid less per patient for a number of factors. First, the decades-long shift in care from inpatient to outpatient settings has accelerated recently, brining in less revenue. Second, Obamacare and a budget-conscious Congress have slowed the growth in Medicare reimbursement for hospitals and doctors. Third, pressure from Anthem and large employers has successfully reduced providers’ prices on imaging and lab tests.
So getting less money from Cigna, potentially, would add one more squeeze to providers’ finances.
Statewide, Cigna controls 11.6 percent of the commercial market, according to data from HealthLeaders-InterStudy. Anthem controls 48.9 percent. So combined, the two companies would claim 60.5 percent of the commercial market.
The next-largest competitor, UnitedHealthcare, claims just 13.1 percent.
That’s significant because commercial health plans pay the highest prices—about double Indianapolis hospital systems’ costs. Having larger market share could also help Anthem negotiate more contracts based on how well doctors and hospitals do at delivering high-quality care and keeping patients healthy. Already, 454,000 Anthem patients in Indiana are covered by such "value-based" payment plans.
Unlike Anthem, Cigna has very little government business in Indiana. In 2014, Anthem covered more than 275,000 Hoosiers via Medicare Advantage plans and through the Indiana Medicaid program. Anthem is also one of the private insurers providing benefits in the expanding Healthy Indiana Plan, which has added 177,000 customers so far this year.
Many analysts had speculated that Anthem would buy Louisville-based Humana Inc. because of its strong Medicare Advantage business. But on Monday, at least one analyst said Cigna was the better choice.
“The potential transaction, in our view, would be financially preferable and relatively safer than a potential Anthem/Humana transaction,” wrote Chris Rigg, an analyst at Susquehanna Financial Group, in a note to investors. He added, “In the case of Cigna, even at a takeout north of $175—say, $185—we’d feel more comfortable simply due to our higher confidence in Cigna’s fundamental outlook.”
Please enable JavaScript to view this content.