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| Photo by Joe Bulewicz, Bloomberg News |
Louisville-based Humana Inc. is in merger talks with The Cigna Group that would create the nation's third-largest company selling health insurance.
The merger would "vault the combined company into the top tier of integrated health-care firms," The Wall Street Journal reports. "Cigna, which had revenue of about $181 billion last year, would be able to marry its huge pharmacy-benefit unit, which manages drug plans, and its strength in commercial insurance with Humana’s big position in the fast-growing Medicare segment, something Cigna has long sought."
Humana is the smaller company, with a market value of about $62 billion and revenues last year of about $140 billion. The merged market value would rank behind UnitedHealth Group and CVS Health among health insurers.
The Journal reports, "Humana could also help Cigna accelerate a strategy that is core to the managed-care business, a move toward paying doctors and hospitals in ways that aren’t tied to the volume of service provided. These 'value-based care' setups are increasingly central to Medicare plans, but have advanced far more slowly in commercial insurance." Humana's Medicare revenue of about $93 billion last year made it the number-two Medicare insurer, after UnitedHealth; Cigna's Medicare Advantage "falls well short of that scale."
Humana has been merger bait for years. In 2015, it explored merging with Cigna, but chose another suitor, Aetna, in a deal that a federal judge blocked on antitrust grounds, "leaving Aetna to be scooped up by CVS in 2018," the Journal notes. "Another deal that would have combined Cigna with Anthem, now known as Elevance Health, also died after an adverse antitrust ruling. The antitrust issues have made national insurers leery of large-scale combinations for years, and the Biden administration has signaled it would give scrutiny to health-industry consolidation."
This year, Humana has "made moves that could clear the deck for a possible combination, announcing in February that it would divest its commercial business and focus on its core Medicare Advantage line. Humana has said its home-health unit and expanding primary-care footprint support its Medicare patients," the Journal notes. "The company is in the midst of its own succession handoff. Humana said in October that Jim Rechtin—previously chief executive of Envision Healthcare—would take over as president and chief operating officer, effective Jan. 8. Rechtin was then to take over as CEO from Bruce Broussard in the back half of 2024."
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