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Speaker 1: Plot that's a Bloomberg business flash you're listening to. Taking
Speaker 1: stock with Kathleen Hayes and Pim Box on Bloomberg Radio.
Speaker 1: A pending fifty four billion dollar merger of the health
Speaker 1: insurers Anthem and Signa couldn't mean more squabbling with either
Speaker 1: regulators or indeed between the management of Anthem and Signa.
Speaker 1: Here to learn more is to help us learn more.
Speaker 1: As Jason Gorman, he is an analyst on medical devices
Speaker 1: and healthcare services for Bloomberg Intelligence. Jason, thanks very much
Speaker 1: for being with us. Explain what is going on right
Speaker 1: now at Anthem and Signa and this potential combination. Yeah,
Speaker 1: and thank you for having me. So they the upshot
Speaker 1: is that they're disagreeing about some of the timing of
Speaker 1: the filing requirements for this deal to go through. Insignia
Speaker 1: has had some uh some issues with Anthem uh suing
Speaker 1: express scripts over some of its disputes and basically uh
Speaker 1: distracting away from from the ongoing deal. So they've had
Speaker 1: uh some tensions both now as well as when they
Speaker 1: frankly first agreed to a deal back last summer. I've
Speaker 1: had health insurance with both companies over the years. But
Speaker 1: to me, a health insurance company is a health insurance company.
Speaker 1: Explained to us, what what place in this industry each
Speaker 1: of the companies occupies, How they're similar, how they're different. Sure,
Speaker 1: so both Anthem Insignia are very large health and shares
Speaker 1: in the commercial market. And what's in focus here is
Speaker 1: plans for employer groups, which is the potential concern with
Speaker 1: the Justice Department. So the difference being that if you
Speaker 1: work for a large employer like Walmart uh and you
Speaker 1: want to get your insurance UM. Now, what companies like
Speaker 1: Anthem Insigna do is they really just manage the claims,
Speaker 1: so it's more of a back end process. And they
Speaker 1: charge a fee for doing that. So it's a little
Speaker 1: bit different than the traditional insurance which we've heard a
Speaker 1: little bit more about, which has gone to like the
Speaker 1: the Obamacare exchanges that we've talked about, So a little
Speaker 1: bit different of a model. And because there's so few
Speaker 1: that can compete on such a large scale, UH, it's
Speaker 1: it's really gotten down to UH a very small compet
Speaker 1: of environments, and you do have to compete with the
Speaker 1: number of members that you have. What kind of breakup
Speaker 1: fee are we talking about here? If they decide or
Speaker 1: for whatever reason, they cannot go through with this combination. Yeah,
Speaker 1: So for the Anthem would have to pay Signa about
Speaker 1: one point nine billion dollars pretexts um for thing that
Speaker 1: if the deal were to fall through, and UH would
Speaker 1: have to pay Humana about a billion dollars. So um.
Speaker 1: That's actually slightly below what some of the comfortable UH
Speaker 1: fees have been another other deals, but still pretty sizeable
Speaker 1: for the companies if they don't end up going through.
Speaker 1: So if I'm the Justice Department, if I'm a consumer,
Speaker 1: if I'm a big company who buys health insurance for
Speaker 1: my employees through one of these big insurance companies. I'm saying,
Speaker 1: why let them merge. That means they'll be fewer choices
Speaker 1: and they can just turn the screws to me all
Speaker 1: the more. Yeah, so they they're there are two separate
Speaker 1: deals that are going on, the and then Humana focusing
Speaker 1: more on medicare is a little less concerning because Medicare
Speaker 1: prices are are relatively um kept in line, whereas from
Speaker 1: a anthem perspective, they would argue that they can actually
Speaker 1: use their sizable membership to negotiate more favorable rates. The
Speaker 1: problem with that is then if a hospital has to
Speaker 1: take that hit, well, then you could argue that the
Speaker 1: quality of our health care would go down because of that.
Speaker 1: Um So, I don't think that their argument holds as
Speaker 1: much water as they're saying it does. What about the
Speaker 1: Department of Justice and the antitrust clearance? Is this is
Speaker 1: a sure thing for the anthem signa deal. Ever since
Speaker 1: these deals were announced, the market has viewed them with
Speaker 1: a large grain of salt. They've the actual value of
Speaker 1: the deals has been at a between twenty two spread
Speaker 1: versus where the boxer training today. Um So, there's a
Speaker 1: big discount for what investors are looking at because of
Speaker 1: that uh possibility that these deals get blocked one or both.
Speaker 1: Uh And from what our work has shown, especially with
Speaker 1: our anti trust attorney, it's it's there is the concern
Speaker 1: that you have, as we've seen with other markets in telecom,
Speaker 1: that if the Justice Spartman looks at it for a
Speaker 1: national basis, well, then the risk goes up that the
Speaker 1: Anthem signal deal gets blocked. And that's why the spread
Speaker 1: on that deal um and investors minds is a little
Speaker 1: bit higher. So in a nutshell, I just want to
Speaker 1: quickly touch on the express Scripts lawsuit. What it is?
Speaker 1: Is it something that maybe Anthem wishes it hadn't gotten
Speaker 1: into now that wants to team up a SIGNA Yeah,
Speaker 1: so they would argue that it's it's sizeable savings. They've
Speaker 1: talked about up to fifteen billion dollars, but even you
Speaker 1: know it's come down now to a couple of billion dollars.
Speaker 1: It does seem to be a bit of a distraction.
Speaker 1: Ultimately being in this space and being a large competitior
Speaker 1: and commercial health insurances what's most important for them. But
Speaker 1: I don't know what that means for for express Scripts. UH.
Speaker 1: They're going to try and get something done, and maybe
Speaker 1: that means that they settle on something um versus fighting
Speaker 1: it out longer term. All right, Jason mcgorman, thank you
Speaker 1: so much for joining us, saying in his latest b
Speaker 1: I Bloomberg Intelligence piece that Anthony has few options if
Speaker 1: this signet deal falls through Living Intelligence. Senior industry analyst
Speaker 1: for managed Care, I'm Kathleen Hayes, along with pim Fox
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