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Big games for U S stocks today, with the DAL currently hired by two and thirty four points, SESPS game thirty and as ZAC rises ninety six, the SP five traded back above it's fifty day moving average. Well, the NAZDAC regain the two hundred day small cap six hundred's hired by fourteen points. In the US ten yield at one point eight six per cent, all ten SEV sectors are higher, led by gains in technology, healthcare, and the financials.
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A pending fifty four billion dollar merger of the health insurers Anthem and Signa couldn't mean more squabbling with either regulators or indeed between the management of Anthem and Signa. Here to learn more is to help us learn more. As Jason Gorman, he is an analyst on medical devices and healthcare services for Bloomberg Intelligence. Jason, thanks very much for being with us. Explain what is going on right now at Anthem and Signa and this potential combination. Yeah,
and thank you for having me. So they the upshot is that they're disagreeing about some of the timing of the filing requirements for this deal to go through. Insignia has had some uh some issues with Anthem uh suing express scripts over some of its disputes and basically uh distracting away from from the ongoing deal. So they've had uh some tensions both now as well as when they frankly first agreed to a deal back last summer. I've
had health insurance with both companies over the years. But to me, a health insurance company is a health insurance company. Explained to us, what what place in this industry each of the companies occupies, How they're similar, how they're different. Sure, so both Anthem Insignia are very large health and shares in the commercial market. And what's in focus here is plans for employer groups, which is the potential concern with
the Justice Department. So the difference being that if you work for a large employer like Walmart uh and you want to get your insurance UM. Now, what companies like Anthem Insigna do is they really just manage the claims, so it's more of a back end process. And they charge a fee for doing that. So it's a little bit different than the traditional insurance which we've heard a little bit more about, which has gone to like the the Obamacare exchanges that we've talked about, So a little
bit different of a model. And because there's so few that can compete on such a large scale, UH, it's it's really gotten down to UH a very small compet of environments, and you do have to compete with the number of members that you have. What kind of breakup fee are we talking about here? If they decide or
for whatever reason, they cannot go through with this combination. Yeah, So for the Anthem would have to pay Signa about one point nine billion dollars pretexts um for thing that if the deal were to fall through, and UH would have to pay Humana about a billion dollars. So um. That's actually slightly below what some of the comfortable UH fees have been another other deals, but still pretty sizeable for the companies if they don't end up going through.
So if I'm the Justice Department, if I'm a consumer, if I'm a big company who buys health insurance for my employees through one of these big insurance companies. I'm saying, why let them merge. That means they'll be fewer choices and they can just turn the screws to me all
the more. Yeah, so they they're there are two separate deals that are going on, the and then Humana focusing more on medicare is a little less concerning because Medicare prices are are relatively um kept in line, whereas from a anthem perspective, they would argue that they can actually
use their sizable membership to negotiate more favorable rates. The problem with that is then if a hospital has to take that hit, well, then you could argue that the quality of our health care would go down because of that. Um So, I don't think that their argument holds as much water as they're saying it does. What about the Department of Justice and the antitrust clearance? Is this is a sure thing for the anthem signa deal. Ever since these deals were announced, the market has viewed them with
a large grain of salt. They've the actual value of the deals has been at a between twenty two spread versus where the boxer training today. Um So, there's a big discount for what investors are looking at because of that uh possibility that these deals get blocked one or both.
Uh And from what our work has shown, especially with our anti trust attorney, it's it's there is the concern that you have, as we've seen with other markets in telecom, that if the Justice Spartman looks at it for a national basis, well, then the risk goes up that the Anthem signal deal gets blocked. And that's why the spread on that deal um and investors minds is a little bit higher. So in a nutshell, I just want to quickly touch on the express Scripts lawsuit. What it is?
Is it something that maybe Anthem wishes it hadn't gotten into now that wants to team up a SIGNA Yeah, so they would argue that it's it's sizeable savings. They've talked about up to fifteen billion dollars, but even you know it's come down now to a couple of billion dollars. It does seem to be a bit of a distraction. Ultimately being in this space and being a large competitior and commercial health insurances what's most important for them. But
I don't know what that means for for express Scripts. UH. They're going to try and get something done, and maybe that means that they settle on something um versus fighting it out longer term. All right, Jason mcgorman, thank you so much for joining us, saying in his latest b I Bloomberg Intelligence piece that Anthony has few options if this signet deal falls through Living Intelligence. Senior industry analyst for managed Care, I'm Kathleen Hayes, along with pim Fox
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