Indianapolis-based Anthem Inc. said Friday that it would acquire Cigna Corp., a major national health insurer with Philadelphia origins and 1,100 local employees, in a deal that would create the largest health-insurance company in the United States.
The $54.2 billion transaction is one in a series of health-insurer mergers announced recently as firms scramble to get on top of rapid changes in the marketplace.
The combined company will have more than $115 billion in annual revenue and an enrollment of 53 million members. Shareholders of Cigna, which has its headquarters in Connecticut, will receive cash and Anthem stock valued at $188 per Cigna share.
Cigna did not respond to questions about the impact on workers at its Center City offices. Its lease at Two Liberty Place expires next year.
Given the rapid consolidation underway among health insurers and providers such as hospitals, the deal between Anthem and Cigna is expected to get close examination from the Justice Department's antitrust division.
"It will get scrutiny because there already has been such a great amount of consolidation," said Theresa Loscalzo, comanaging partner of Center City's Schnader Harrison Segal & Lewis L.L.P. "It is very difficult to know how this will play out before Justice has weighed in."
If the Cigna/Anthem deal goes through, United Health Group Inc., with 46 million members, would drop to second among health insurers. Last month, Aetna Inc. announced a $37 billion deal with Humana Inc. that would make it the nation's third-largest health insurer, with 33 million members.
Industry observers typically see the deals as a response to the Affordable Care Act. In general, the act tightened reimbursements for some players while broadening the availability of insurance, forcing the need for greater efficiencies.
"The complementary nature of our businesses will allow us to leverage the deep global health-care knowledge, local market talent, and expertise of both organizations," said David M. Cordani, president and CEO of Cigna.
Anthem said Friday that Joseph Swedish will serve as chairman and CEO of the combined company, while Cordani will be president and chief operating officer. The deal is expected to close in the second half of 2016.
Roots in Philadelphia
Cigna has deep roots in Philadelphia. It was formed in 1982, when Insurance Co. of North America merged with Connecticut General Life Insurance Co.
Founded in 1792 in Philadelphia, INA was at the time the oldest stockholder-owned insurance company in the U.S.
Philadelphia was home to Cigna's headquarters until 2011, when Cordani announced a deal with Connecticut officials to move it to Bloomfield, Conn., in exchange for a $50 million economic-incentive package. The company retained the 1,000-plus jobs here, but most of its senior executives moved north.
After the Cigna acquisition was announced Friday, various law firms said they had begun investigations to see whether shareholder interests would be ill-served. But Loscalzo suggested there would be minimal impact.
Concern over rates
Though Anthem and Cigna said the deal would provide efficiencies permitting the combined company to provide better service, skeptics contended such combinations would give insurers increased latitude to raise rates.
The American Medical Association said in a statement that the dwindling number of health insurers gives the industry the power to "dictate premium increases" and pursue other policies at odds with the interests of patients.
"The American Medical Association believes patients are better served in a health-care system that promotes competition and choice," said AMA president Steven Stack. "We have long cautioned about the negative consequences of large health insurers pursuing merger strategies to assume dominant positions in local markets."
Connecticut Sen. Richard Blumenthal, a Democrat, tweeted that mergers by health insurers should be scrutinized to make sure that consumers' interests were protected.