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Anthem mega-merger would create California's largest insurer

Anthem mega-merger would create California's largest insurer
Anthem Blue Cross' office building in Woodland Hills. (Michael Nelson / European Pressphoto Agency)

HMO giant Kaiser Permanente might lose its perch atop California's health insurance world.

Anthem Inc. could leapfrog Kaiser and become the state's biggest health plan if its $54-billion acquisition of Cigna Corp. goes through next year. The deal was announced Friday.

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Kaiser leads the California health insurance market with 7.8 million members through April, company figures show. The HMO is a popular option at many large employers and in California's Obamacare exchange.

Anthem is second in the state with about 6.1 million members, according to state data for 2013, the latest available. Cigna had about 2.1 million California customers, many of them in employer self-insured plans that the company runs. Together, the two companies would surpass Kaiser.

An Anthem spokesman said the company expects to be California's largest health insurer overall once the Cigna deal closes in the second half of 2016. It's already the biggest for-profit insurer since Kaiser is nonprofit.

The loss of another competitor in Cigna might not bode well for employers and consumers even though California's market is more competitive than other states.

"Employers stand to lose another alternative, but it won't be a devastating blow in California," said Paula Wade, an analyst at Decision Resources Group.

Friday, Anthem Chief Executive Joseph Swedish touted the Cigna acquisition as a way to eliminate unnecessary costs and deliver more affordable benefits to consumers.

"We believe we have got the right commitment to deliver an affordable healthcare coverage model," Swedish said on a conference call with analysts.

John Nelson, a spokesman for Kaiser, said the entire healthcare industry is undergoing significant changes and consolidation is one byproduct.

But he said Kaiser's continued growth reflects the "appeal of our integrated model of high-quality, affordable care and coverage."

Last year, Anthem took aim at Kaiser with a new Vivity health plan in Southern California.

To form Vivity, Anthem struck an unusual partnership with several leading hospital systems, including Cedars-Sinai and UCLA, to form a lower-cost HMO that could better compete against Kaiser.

Anthem said the Vivity health plan has signed up about 12,000 members in its first year.

Twitter: @chadterhune

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