Leerink Partners Thinks Heath Insurance Big 5 'Is Ready To Become A Big 3'

The health insurance industry seems to be in a takeover mania right now with all the major five players involved in one way or the other. While Aetna Inc AET made an offer for Humana Inc HUM recently, Anthem Inc ANTM made a $184 per share takeover bid for CIGNA Corporation CI on Friday, which was rejected by the latter on Sunday.

Ana Gupte, Leerink Partners senior analyst, was on CNBC Monday to discuss the possibilities of these mergers actually being completed.

The Deal Will Go Through

"I think the industry is ready to become a 'Big 3' industry from 'Big 5,'" Gupte began. "The industry has been too fragmented to meet all the requirements of Obamacare and make an adequate margin and return on capital.

"I think the most obvious combinations to me looks like Anthem-Cigna, and I do think the deal will get done. I think [they] are also very synergistic and will create a nice diversified, commercial and Medicare/ senior powerhouse. And then we have United."

Related Link: These 3 Rumored Managed Healthcare M&A Deals Coudl Create Antitrust Time Bombs

Antitrust Hurdles

Gupte was asked if these deals could see any hurdles from an antitrust perspective. She replied, "There might be some modest divestitures in pockets that are acquired for each of the deal, but if I took a look at Anthem and Cigna or Aetna and Humana, there don't seem to be any deal-killers, if you will, from an antitrust perspective."

She explained, "Specifically, if I take Anthem and Cigna – in terms of the employer market, I actually think the complimentary capabilities and the footprint from a combined company will be quite beneficial for employers. If you look at Aetna and Humana, that is a Medicare advantage story combined with commercial. So, again, if you look at those from a product-by-product basis, I don't think it raises any major reflex."

According to Gupte, Anthem can increase its offer by "another $5" by acquiring Cigna.