Anthem-Cigna Deal Near Halfway Home Despite Doubters

As doubts swirl about whether Anthem can pull off its pending acquisition of Cigna , the companies have won regulatory approval in nearly half of the 26 states where state regulatory clearance is required.

Anthem said the Cigna merger was approved by regulators in Indiana, the 12th of 26 states needed in its effort to win over federal and state regulators in its $54 billion bid for Cigna. If the deal comes together, it would make Anthem, an operator of Blue Cross and Blue Shield plans in 14 states, the nation’s largest health insurance company, ahead of UnitedHealth Group .

“We continue to have a productive ongoing dialogue with federal and state regulators regarding the merits of this compelling combination,” Anthem spokeswoman Jill Becher said, adding that executives still "expect to close the transaction in the second half of 2016."

Health plans say consolidation among health insurers is needed as the Affordable Care Act and moves toward value-based care require large populations of patients to spread risk, making sure premium dollars cover the expenses of sick enrollees and improve health outcomes. The health law also requires insurers to keep administrative costs in check, which insurers say means they need to consolidate to eliminate duplication.

But significant hurdles remain for Anthem’s Cigna buy and the deal isn’t as far along as Aetna ’s proposed acquisition of Humana . And a smaller deal–Centene’s purchase of HealthNet–has already been approved by state and federal regulators.

Divestitures may be required amid antitrust scrutiny by the U.S. Justice Department.

Aetna said it has already obtained “change of control regulatory approvals” in 15 of 20 states that are needed to close the transaction. Five of those state approvals have come in the past two months, an Aetna spokesman confirmed.

A string of recent reports in both the media and from stock analysts have called into question whether Anthem will close its purchase of Cigna. The Wall Street Journal earlier this week said executives “privately bicker” behind the scenes over antitrust issues that could derail or delay the deal.

Both mergers need approval of federal regulators, which have been hearing from many outside groups including doctors and hospitals. Critics say a larger Aetna–and the combination of Anthem and Cigna–would give insurers too much power to potentially raise prices and end choices for seniors who buy Medicare Advantage plans, which contract with the government to provide traditional Medicare coverage plus extras that include wellness care, preventive screenings and prescription drugs.