ANTHEM TO BUY CIGNA, CREATING BIGGEST U.S. HEALTH INSURER

Anthem will buy Cigna for about $54.2 billion, creating the largest U.S. health insurer by membership and accelerating the industry's consolidation from five national players to three.

The proposed acquisition, the health insurance industry's largest, comes three weeks after Aetna Inc agreed to buy Humana Inc for $37 billion. Health insurers are finding it tougher to raise prices following the roll-out of President Barack Obama's healthcare law, while grappling with soaring expenses of medications including cancer drugs that can cost each patient more than $100,000 a year.

Anthem said buying Cigna would help it reduce costs and negotiate lower prices with doctors and hospitals.

State insurance regulators and federal antitrust authorities are expected to scrutinize how the Anthem-Cigna and Aetna-Humana deals would affect competition for Medicare and individual and commercial insurance.

Within a few hours of the announcement, several U.S. lawmakers and a leading physicians group said they feared the pending acquisitions would hurt consumers by raising prices or limiting access to healthcare providers.

The AMA said its own analysis shows 41 percent of U.S. metropolitan areas already have a single health insurer with a commercial market share of 50 percent or more.

 Cigna has 15 million members, and about 80 percent of its business is with self-insured companies which pay it a management fee

About 61 percent of Anthem's 39 million members are served through self-insured companies, while 15 percent have Medicaid coverage.

Large and small group policies make up about 12 percent of its business, while Medicare Advantage accounts for 1 percent.

The combined company would have about 53 million members, surpassing UnitedHealth Group's 45.86 million as of June 30. Another question is whether Anthem would violate rules of the Blue Cross and Blue Shield Association, a federation of 36 independent insurers of which it is the biggest member.

The association collectively insures 106 million Americans.

Anthem provides coverage to the most people and operates in 14 states. No other Blue Cross member operates in more than five states.

Blue Cross operators are not supposed to compete with one another, but Cigna does compete against Blue Cross members in a handful of states, which could cause controversy in the association.