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Could fallout of Anthem-Cigna merger spur smaller health plan M&A?

If Anthem's $48 billion deal to acquire Cigna doesn't come to fruition, the payers will likely seek other assets in smaller health plans. Speculation arose earlier this week when Anthem's Chief Financial Officer John Gallina told 20 analysts the payer is currently working on "remediation plans," which consist of purchasing assets from Aetna. Sources familiar with the matter took the move to mean Anthem may be shelving its plans to purchase Cigna, as it would not realistically plan to merge with Cigna if it was buying Aetna assets, a major Cigna rival.

Cigna may pursue deals with smaller payers including WellCare Health Plans, Centene and Molina Healthcare if all else fails with Anthem, according to Bloomberg. As Aetna and Humana enter a smoother route to approval, the payers may sell various assets, which Anthem may surely pick up.

Wall Street analysts have said the Department of Justice will likely work to block the Anthem-Cigna merger, but Anthem can still fight the move as its agreement with Cigna runs through January 2017.

However, following news regarding its merger fate, an Anthem spokesperson sent an email stating, "Anthem and Cigna are not in discussions regarding a termination of the merger agreement or the payment of a breakup fee. Anthem and Cigna continue to be in ongoing dialogue with the Department of Justice and state regulators regarding the compelling combination of our two companies."

If the Justice Department blocks the deal or speculation proves true and Anthem fails to follow-through with the deal, Cigna could accrue a more dominant position in the Medicaid and Medicare market through purchasing WellCare and Molina. Centene CEO Michael Neirdorr said a Centene acquisition would not be a sure fate as, "Centene will continue to be an acquirer in the industry, not an acquiree."

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