Anthem to fight for Cigna deal, sees Obamacare losses

Wed Jul 27, 2016 2:22pm EDT
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By Bill Berkrot and Amrutha Penumudi

(Reuters) - Health insurer Anthem Inc (ANTM.N: Quote) on Wednesday vowed to fight U.S. government efforts to block its planned acquisition of Cigna Corp (CI.N: Quote) and said it expects to lose money this year on its business selling individual health coverage under President Barack Obama's healthcare law.

Anthem has argued that its planned $45-billion purchase of Cigna will give it greater leverage to negotiate better prices from healthcare providers and pass on those savings to consumers, including those signing up for "Obamacare" plans on public insurance exchanges.

"To be clear, our board and executive leadership team at Anthem is fully committed to challenging the (U.S. Department of Justice's) decision in court," Chief Executive Joseph Swedish told analysts on a conference call.

Anthem had previously said it expected to break even on its Obamacare business this year. But on Wednesday, the insurer said that business could decline by mid-single-digit percentages due to higher-than-expected costs of caring for those members.

Shares in Anthem fell more than 2 percent. The company said it was "focused on returning to profitability in 2017" in its exchange business.

Anthem said it now serves 923,000 public exchange members across 14 states in what it called a high-risk market. Rivals such as UnitedHealth Group (UNH.N: Quote) and Humana Inc (HUM.N: Quote) plan to exit most of their exchange business.

"On the exchanges, if the risk pool doesn't deteriorate further next year, it's possible they get to break even. If they at least reach break even, that's a big improvement," said Leerink Partners analyst Ana Gupte.

The Justice Department last week sued to block Anthem's Cigna deal and Aetna Inc's (AET.N: Quote) planned acquisition of Humana, saying the multibillion-dollar deals would reduce competition, raise prices for consumers and stifle innovation if the number of large, national insurers fell from five to three..   Continued...

The office building of health insurer Anthem is seen in Los Angeles, California February 5, 2015.   REUTERS/Gus Ruelas