Author Archives: Reeve Conover

Cigna Anthem Merger may not get done

FROM LIFEHEALTHPRO:

Bloomberg) — Cigna Corp.’s acquisition by health-insurance rival Anthem (NYSE:ANTM) may not be approved this year, Cigna (NYSE:CI) said Friday in a regulatory filing.

Shares of both companies declined. An analyst said the delay could be a sign of trouble for the deal, which is one of two pending health insurance combinations being scrutinized by regulators. Regulators have expressed concern about further concentration of the health care industry.

“While the company continues to work toward achieving regulatory approval as quickly as possible and to target a closing date in the second half of 2016, the closing will ultimately be subject to the approval and timing of the regulators,” Cigna said in a quarterly report filed with the U.S. Securities and Exchange Commission (SEC). “In light of the complexity of the regulatory process and the dynamic environment, it is possible that such approvals may not be obtained in 2016.”

Joseph Swedish, Anthem’s chief executive officer, said last week that he expected the acquisition of Cigna to be completed in the second half of this year. On Friday, Jill Becher, an Anthem spokeswoman, said the insurer continued to expect the transaction to be completed on that timeline.

Anthem agreed in July to buy Cigna in a cash-and-stock deal that valued Cigna at about $48 billion. The transaction, along with the pending acquisition of Humana (NYSE:HUM) by Aetna (NYSE:AET), would reduce the number of big U.S. health insurers to three, from five.

The Anthem-Cigna merger requires approval from the U.S. Justice Department’s antitrust division as well as state insurance regulators. In March, Bill Baer, now the No. 3 official at the Justice Department, called the Cigna deal and Aetna’s deal for Humana “transformational” and said they require close scrutiny from the government.

Matt Asensio, a Cigna spokesman, declined to specify why the insurer cautioned that the deal may not happen this year.

“This disclosure reflects our current understanding, based on the breadth and depth of the review and where we believe we are in the process now,” Asensio said. “We feel that it’s a dynamic environment, and there’s a lot of complexity in the regulatory process, so it’s possible that the approvals may not be obtained in 2016.”

Cigna said in the filing that Anthem may owe it a breakup fee of $1.85 billion if the transaction isn’t completed by Jan. 31, 2017. That deadline can be pushed back to April 30, Cigna said.

Cigna fell 1.9 percent to $132.40 at 10:30 a.m. in New York, while Anthem declined less than 1 percent to $136.77.

Peter Costa, an analyst at Wells Fargo & Co., said Cigna’s disclosure indicates the deal could be delayed or not approved at all. “The 10Q deal timing disclosure is a significant item that likely widens the spread,” he wrote in a research note to clients.

See also:

Aetna’s Humana deal pressures Cigna to agree on Anthem offer

AIG Confirms It Will Get Breakup Fee

HSA limits for 2017 released

2017 HSA Contributions
The IRS issued Rev. Proc. 2016-28 establishing the 2017 contribution limits for Health Savings Accounts. Individuals with self-only coverage under a high-deductible health plan will be permitted to contribute $3400 (up $50 from 2016), and $6,750 for individuals with family coverage under a high-deductible health plan.  The out-of-pocket maximums for 2017 will remain the same at $6550 for self-only coverage and $13,100 for family coverage.

The Fiduciary Rules has been released – how will it affect you?

A fiduciary is generally someone who has to put the best interests of the beneficiaries first, instead of their own.  While most people think that their investment advisor does that, it much less clear in the investment adviser community, which I have to say has always been somewhat concerning to me.

If you are a business owner, and have a retirement plan, as Trustee of that Plan you are in a fiduciary role- you have to put your employees best interests first.  This means applying the “prudent man” rule to selecting and monitoring investments, among many other things.  But shouldn’t your investment advisor be held to the same standard?  of course.

But that hasn’t been the case.  Under the new rules, you should be paying your adviser on a fee-based contract, and not based on commissions;  that is going to mean ALOT of plans have to change in the next year.  Commission-based payments have a alot of room for “issues” and conflict of interest.

As an example, say the adviser chooses the XYZ large cap fund, which has a cost ratio and commission structure higher than the similar ABC fund.  Did they do that because it is a “better fund” or because it pays more?  Are you prepared, as plan trustee, to defend the definition of “better fund” to your employees?

I have been fee-based in almost all my corporate accounts for years, because I believe that we should agree on what I am paid to do, and how much I get paid to provide those services.

In the end, the fiduciary rule changes may mean very little to you – or they may require wholesale changes to your plan.

United Healthcare exits Individual Market

While this has garnered alot of attention around the country and in the press and media, it is no surprise to anyone in the industry.  “The smaller overall market size and shorter-term higher risk profile within this market segment continue to suggest we cannot broadly serve it on an effective and sustained basis,” said CEO Stephen Hemsley in the company’s quarterly earnings conference call.

While United covers more Americans for health insurance than any other private insurer, it has only been a bit player in the individual/exchange marketplace;  most of its members are corporate plans.

A big part of the problem that was completely expected by industry experts is that the exchanges are “adversely selected” meaning that they have sicker enrollees.  “So as we look at it, the early indications on the health status of the members appears to be a little bit worse,” said UnitedHealthcare CFO Daniel Schumacher.  The original expectations of the administration was that younger members that were healthier would offset this problem, but they have not enrolled as expected.

NY to allow anytime enrollment for Domestic Violence Victims

ALBANY, N.Y. (AP) — New York is requiring insurers providing individual coverage through the state health exchange to allow victims of domestic violence or abandonment to enroll at any time.

The Department of Financial Services says those enrollments should be available starting Friday for coverage outside the state-operated exchange.

Standard enrollments through the exchange, established under the Affordable Care Act, are limited to between Nov. 1 to Jan. 31.

The department says the approach is consistent with federal policy and coverage will be available to any member of a household who is a victim, including those who are unmarried and dependents.

Insurers are Affinity, CDPHP HMO, Emblem HIP, Empire HMO, Excellus, Fidelis, HealthFirst, HealthNow, Independent IHBC, Metro Plus, MVP Health Plan, North Shore LIJ, Oscar, Oxford OHP, United and Wellcare.

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Reeve Conover is a Registered Representative. Securities offered through Cambridge Investment Research, Inc., a Broker/dealer member FINRA/SPIC. Cambridge and Conover Consulting are not affiliated. Licensed in SC, NC, NY, CT, NJ, and CA.
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