Latest / Bloomberg Intelligence / Bloomberg's McGorman on Doubts Cast on Anthem-Cigna Deal(Audio)

Transcript

Bloomberg's McGorman on Doubts Cast on Anthem-Cigna Deal(Audio) · Bloomberg Intelligence

• 0:02
  Speaker 1: Global business news twenty four hours a day at Bloomberg
• 0:06
  Speaker 1: dot com, the Radio plus Mobile Act and on your radio.
• 0:09
  Speaker 1: This is a Bloomberg Business Flash from Bloomberg World hand Quarters.
• 0:14
  Speaker 1: I'm Charlie Pelotondal the SMP NESDAC all advancing forty two
• 0:18
  Speaker 1: minutes to go ahead of the clothes. Let's head on
• 0:21
  Speaker 1: over to the First Word breaking news desk for today's
• 0:24
  Speaker 1: afternoon call. And here he is, Bill Maloney. Good afternoon, Charlie.
• 0:28
  Speaker 1: Big games for U S stocks today, with the DAL
• 0:31
  Speaker 1: currently hired by two and thirty four points, SESPS game
• 0:34
  Speaker 1: thirty and as ZAC rises ninety six, the SP five
• 0:38
  Speaker 1: traded back above it's fifty day moving average. Well, the
• 0:41
  Speaker 1: NAZDAC regain the two hundred day small cap six hundred's
• 0:44
  Speaker 1: hired by fourteen points. In the US ten yield at
• 0:47
  Speaker 1: one point eight six per cent, all ten SEV sectors
• 0:50
  Speaker 1: are higher, led by gains in technology, healthcare, and the financials.
• 0:54
  Speaker 1: Transports rise fifty two and that's about Texas jump fifty eight,
• 0:58
  Speaker 1: and the VIX is lower by eight percent. Deleator City
• 1:01
  Speaker 1: upside included Microsoft, Intel and Visa. Fractional losses for Boeing
• 1:06
  Speaker 1: until news Monsanto rejected Bears Bid is still open to
• 1:10
  Speaker 1: talks regarding earnings. This morning best Bifle as much as
• 1:13
  Speaker 1: eight point nine percent, and after the belt to night
• 1:16
  Speaker 1: look for earnings from into it Hewla Packard Enterprise and
• 1:18
  Speaker 1: Computer Sciences Live from the First Breaking News Desk on
• 1:22
  Speaker 1: Bill Maloney. Charlotte, all right, thank you very much. I've
• 1:24
  Speaker 1: got you covered. After the bell again, recapping stocks, surging
• 1:27
  Speaker 1: to hear live breaking news over your Bloombird time Squawk
• 1:31
  Speaker 1: SQ you a w K on your terminal. I'm Charlie
• 1:35
  Speaker 1: Plot that's a Bloomberg business flash you're listening to. Taking
• 1:39
  Speaker 1: stock with Kathleen Hayes and Pim Box on Bloomberg Radio.
• 1:43
  Speaker 1: A pending fifty four billion dollar merger of the health
• 1:47
  Speaker 1: insurers Anthem and Signa couldn't mean more squabbling with either
• 1:53
  Speaker 1: regulators or indeed between the management of Anthem and Signa.
• 1:57
  Speaker 1: Here to learn more is to help us learn more.
• 1:59
  Speaker 1: As Jason Gorman, he is an analyst on medical devices
• 2:02
  Speaker 1: and healthcare services for Bloomberg Intelligence. Jason, thanks very much
• 2:07
  Speaker 1: for being with us. Explain what is going on right
• 2:09
  Speaker 1: now at Anthem and Signa and this potential combination. Yeah,
• 2:14
  Speaker 1: and thank you for having me. So they the upshot
• 2:18
  Speaker 1: is that they're disagreeing about some of the timing of
• 2:22
  Speaker 1: the filing requirements for this deal to go through. Insignia
• 2:27
  Speaker 1: has had some uh some issues with Anthem uh suing
• 2:32
  Speaker 1: express scripts over some of its disputes and basically uh
• 2:37
  Speaker 1: distracting away from from the ongoing deal. So they've had
• 2:40
  Speaker 1: uh some tensions both now as well as when they
• 2:44
  Speaker 1: frankly first agreed to a deal back last summer. I've
• 2:49
  Speaker 1: had health insurance with both companies over the years. But
• 2:52
  Speaker 1: to me, a health insurance company is a health insurance company.
• 2:55
  Speaker 1: Explained to us, what what place in this industry each
• 2:59
  Speaker 1: of the companies occupies, How they're similar, how they're different. Sure,
• 3:05
  Speaker 1: so both Anthem Insignia are very large health and shares
• 3:09
  Speaker 1: in the commercial market. And what's in focus here is
• 3:13
  Speaker 1: plans for employer groups, which is the potential concern with
• 3:18
  Speaker 1: the Justice Department. So the difference being that if you
• 3:22
  Speaker 1: work for a large employer like Walmart uh and you
• 3:26
  Speaker 1: want to get your insurance UM. Now, what companies like
• 3:30
  Speaker 1: Anthem Insigna do is they really just manage the claims,
• 3:34
  Speaker 1: so it's more of a back end process. And they
• 3:37
  Speaker 1: charge a fee for doing that. So it's a little
• 3:39
  Speaker 1: bit different than the traditional insurance which we've heard a
• 3:42
  Speaker 1: little bit more about, which has gone to like the
• 3:45
  Speaker 1: the Obamacare exchanges that we've talked about, So a little
• 3:49
  Speaker 1: bit different of a model. And because there's so few
• 3:51
  Speaker 1: that can compete on such a large scale, UH, it's
• 3:55
  Speaker 1: it's really gotten down to UH a very small compet
• 4:00
  Speaker 1: of environments, and you do have to compete with the
• 4:02
  Speaker 1: number of members that you have. What kind of breakup
• 4:05
  Speaker 1: fee are we talking about here? If they decide or
• 4:07
  Speaker 1: for whatever reason, they cannot go through with this combination. Yeah,
• 4:11
  Speaker 1: So for the Anthem would have to pay Signa about
• 4:15
  Speaker 1: one point nine billion dollars pretexts um for thing that
• 4:20
  Speaker 1: if the deal were to fall through, and UH would
• 4:23
  Speaker 1: have to pay Humana about a billion dollars. So um.
• 4:28
  Speaker 1: That's actually slightly below what some of the comfortable UH
• 4:33
  Speaker 1: fees have been another other deals, but still pretty sizeable
• 4:36
  Speaker 1: for the companies if they don't end up going through.
• 4:40
  Speaker 1: So if I'm the Justice Department, if I'm a consumer,
• 4:42
  Speaker 1: if I'm a big company who buys health insurance for
• 4:45
  Speaker 1: my employees through one of these big insurance companies. I'm saying,
• 4:49
  Speaker 1: why let them merge. That means they'll be fewer choices
• 4:52
  Speaker 1: and they can just turn the screws to me all
• 4:53
  Speaker 1: the more. Yeah, so they they're there are two separate
• 4:58
  Speaker 1: deals that are going on, the and then Humana focusing
• 5:01
  Speaker 1: more on medicare is a little less concerning because Medicare
• 5:05
  Speaker 1: prices are are relatively um kept in line, whereas from
• 5:10
  Speaker 1: a anthem perspective, they would argue that they can actually
• 5:15
  Speaker 1: use their sizable membership to negotiate more favorable rates. The
• 5:20
  Speaker 1: problem with that is then if a hospital has to
• 5:23
  Speaker 1: take that hit, well, then you could argue that the
• 5:26
  Speaker 1: quality of our health care would go down because of that.
• 5:28
  Speaker 1: Um So, I don't think that their argument holds as
• 5:31
  Speaker 1: much water as they're saying it does. What about the
• 5:35
  Speaker 1: Department of Justice and the antitrust clearance? Is this is
• 5:39
  Speaker 1: a sure thing for the anthem signa deal. Ever since
• 5:44
  Speaker 1: these deals were announced, the market has viewed them with
• 5:48
  Speaker 1: a large grain of salt. They've the actual value of
• 5:52
  Speaker 1: the deals has been at a between twenty two spread
• 5:59
  Speaker 1: versus where the boxer training today. Um So, there's a
• 6:03
  Speaker 1: big discount for what investors are looking at because of
• 6:06
  Speaker 1: that uh possibility that these deals get blocked one or both.
• 6:11
  Speaker 1: Uh And from what our work has shown, especially with
• 6:14
  Speaker 1: our anti trust attorney, it's it's there is the concern
• 6:20
  Speaker 1: that you have, as we've seen with other markets in telecom,
• 6:23
  Speaker 1: that if the Justice Spartman looks at it for a
• 6:25
  Speaker 1: national basis, well, then the risk goes up that the
• 6:29
  Speaker 1: Anthem signal deal gets blocked. And that's why the spread
• 6:31
  Speaker 1: on that deal um and investors minds is a little
• 6:34
  Speaker 1: bit higher. So in a nutshell, I just want to
• 6:38
  Speaker 1: quickly touch on the express Scripts lawsuit. What it is?
• 6:41
  Speaker 1: Is it something that maybe Anthem wishes it hadn't gotten
• 6:43
  Speaker 1: into now that wants to team up a SIGNA Yeah,
• 6:47
  Speaker 1: so they would argue that it's it's sizeable savings. They've
• 6:50
  Speaker 1: talked about up to fifteen billion dollars, but even you
• 6:53
  Speaker 1: know it's come down now to a couple of billion dollars.
• 6:57
  Speaker 1: It does seem to be a bit of a distraction.
• 7:00
  Speaker 1: Ultimately being in this space and being a large competitior
• 7:04
  Speaker 1: and commercial health insurances what's most important for them. But
• 7:07
  Speaker 1: I don't know what that means for for express Scripts. UH.
• 7:10
  Speaker 1: They're going to try and get something done, and maybe
• 7:12
  Speaker 1: that means that they settle on something um versus fighting
• 7:16
  Speaker 1: it out longer term. All right, Jason mcgorman, thank you
• 7:20
  Speaker 1: so much for joining us, saying in his latest b
• 7:24
  Speaker 1: I Bloomberg Intelligence piece that Anthony has few options if
• 7:27
  Speaker 1: this signet deal falls through Living Intelligence. Senior industry analyst
• 7:32
  Speaker 1: for managed Care, I'm Kathleen Hayes, along with pim Fox
• 7:36
  Speaker 1: taking stock on Bloomberg Radio. Bloomberg Taking Stock is brought
• 7:47
  Speaker 1: by the Suffolk County i d A financial incentives and
• 7:50
  Speaker 1: programs to help your business thrive on Long Island. Visit
• 7:53
  Speaker 1: Suffolk i d A dot Org not