(Bloomberg) — Shares of health insurers from Cigna Corp. (NYSE:CI) to Aetna Inc. (NYSE:AET) surged on speculation that the industry is heading for a round of mergers to boost profits.
Anthem Inc. (NYSE:ANTM) has explored a takeovers of smaller health-insurance rivals Cigna and Humana Inc. (NYSE:HUM), a person with knowledge of the matter said, asking not to be identified discussing private information. In a third possible combination, Humana has also drawn interest from Aetna Inc., another person said.
Cigna rose as much as 19 percent and Aetna climbed as much as 7.2 percent. Anthem’s interest in Cigna was reported earlier by the Wall Street Journal, which also said UnitedHealth Group Inc. (NYSE:UNH) may be interested in a deal for Aetna or Cigna, citing people familiar with the matter.
The reports add to the drumbeat for consolidation in the health-insurance industry. Humana is already exploring a sale after being approached by Cigna about a potential deal, Bloomberg News reported last month, citing a person with knowledge of the matter. Humana offers Cigna a way to gain the lead in the market for Medicare Advantage policies, the health insurer-run version of the U.S.’s program to cover the elderly and disabled.
Jon Sandberg, a spokesman for Cigna, and Kristin Binns, a spokeswoman for Anthem, declined to comment to Bloomberg News. Tyler Mason at UnitedHealth and Cynthia Michener at Aetna also declined to comment.
Health insurers in the U.S. have been trading near all-time highs after enjoying an influx of new business from the Patient Protection and Affordable Care Act (PPACA), which brought previously uninsured people into the market for the first time. At the same time, the law put pressure on profit margins by imposing new fees on the companies and mandating that they spend at least 80 percent to 85 percent of premiums on medical claims.
With the initial surge of Obamacare enrollment now leveling off, the companies are looking at mergers to cut costs and keep profits expanding.
The Supreme Court is preparing to issue a ruling, on King vs. Burwell, and the U.S. Department of Health and Human Services (HHS) is preparing to give health insurers information about PPACA risk-adjustment program cash flows.