Could pressures from health care reform force two of Greater Hartford's largest health insurance companies to join forces? Maybe, one analyst says.
Speculation has been growing in recent weeks that Hartford health insurer Aetna and Philadelphia-based managed care provider Cigna, which has major operations in Bloomfield, could make perfect merger pals.
Rumblings about a possible deal began when Cigna CEO David Cordani told analysts at an investor's conference earlier this month that a merger between Cigna and Aetna would have benefits including adding significant scale, according to Dow Jones News service.
Cordani also said Cigna could generate shareholder value by remaining independent, Dow Jones reported.
But then Barclays analyst Josh Raskin recently wrote a note to investors that outlined 10 reasons why a deal between the two companies makes sense, and he even provided a timeline for when it could unfold.
Aetna and Cigna declined to talk about merger speculation, and it's not clear if they even have had talks yet.
But if a deal were to happen it would have major implications for Connecticut. Both companies are significant employers in Greater Hartford and a merger would undoubtedly lead to consolidation of their workforces.
And their combination would also give them the largest market share for health insurance coverage in the state surpassing Anthem Blue Cross and Blue Shield, which currently holds that position.
In terms of Raskin's rationale for why a deal makes sense he said:
· The benefits of scale would likely significantly improve their competitiveness in the marketplace and create the second largest commercial health plan in the country behind Wellpoint.
· There is a sense of urgency for both companies to reverse recent market share losses in the commercial market space. After being market share leaders about a decade ago, UnitedHealth and Wellpoint have surpassed Cigna and Aetna in commercial membership.
· The combined entity would become a leader in international services and have the opportunity to improve cross selling of specialty services.
· The preparation and cost challenges related to meeting new requirements under health care reform would be easier met through combined efforts of two managed care companies.
Raskin went on to say that if a deal were to get done it would need to be closed in early 2012 and both companies fully integrated by end of 2012.
He said that date is significant because it is right before many of the main aspects of federal health care reform need to be implemented in 2014, including the health exchanges and individual mandate.