Well being insurer giants Cigna and Humana are in merger talks, in accordance a variety of stories media stories that started breaking on Wednesday afternoon, Nov. 29. As Reuters’ Anirban Sen and Deena Beasley reported on Wednesday afternoon, “U.S. well being insurer Cigna (CI.N) is in talks to merge with peer Humana (HUM.N), a supply conversant in the matter mentioned on Wednesday, a deal that would exceed $60 billion in worth and would make sure to draw fierce antitrust scrutiny. The discussions come six years after regulators blocked mega-deals that will have consolidated the U.S. medical insurance sector. After U.S. courts upheld antitrust challenges in 2017, Cigna gave up on a $48 billion deal to accumulate Anthem — now often called Elevance Well being. Shedding the authorized battle additionally triggered Aetna — now owned by pharmacy chain operator CVS Well being (CVS.N) — to desert a $37 billion deal to accumulate Humana.”
The primary mainstream media report got here from Lauren Thomas, Anna Wilde Mathews, and Laura Cooper, who broke the story in The Wall Road Journal at 4:28 PM japanese time on Wednesday. Citing folks conversant in the matter, they reported that Cigna and Humana are discussing an all-cash deal that will be finalized by the tip of 2023, in accordance with the report. Cigna carries an $83 billion market worth and Humana’s market worth is $62 billion, permitting a mixed entity to rival the most important gamers on this area: UnitedHealth Group and CVS Well being, they famous. And so they famous that the deal would give Cigna, and its huge pharmacy profit supervisor Specific Scripts, a a lot bigger foothold within the sizzling Medicare Benefit market. The 2 insurers did talk about the potential to merge in 2015, although a deal didn’t come collectively, in accordance with the report.
And, as Josh Nathan-Kazis and Emily Dattilo wrote in Barron’s on Wednesday, “A report earlier this month that Cigna was shedding a probably conflicting division steered {that a} deal was within the works. The Journal article has strengthened expectations {that a} transaction is on the best way. A mixed Cigna and Humana would possible be the second-largest publicly traded well being insurer within the U.S., after UnitedHealth Group,” Nathan-Kazis and Datillo famous that Cigna’s market worth is $83.7 billion, whereas Humana’s is $62.8 billion. UnitedHealth’s is $500 billion,” including that “The 2 firms concentrate on separate ends of the medical insurance market, which may present a rationale for the merger. Humana is among the largest sponsors of Medicare Benefit plans, a well-liked different to conventional Medicare beneath which the federal authorities pays personal firms to handle the well being advantages of U.S. seniors. Cigna, in the meantime, is among the many largest gamers within the business insurance coverage market. “Any deal would face shut scrutiny from regulators.,” they added. “In 2017, a federal choose blocked a merger between Humana and Aetna after the Division of Justice raised antitrust issues. The businesses already seem like getting ready for potential objections.”
What’s extra, they famous, “Reuters reported in early November that Cigna is wanting into promoting its Medicare Benefit enterprise. Humana dominates that a part of the market, so a sale would possible be wanted for the deal to cross antitrust muster. Humana, in the meantime, mentioned in February that it deliberate to exit the business insurance coverage enterprise. Each firms have in-house pharmacy profit managers, which negotiate straight with drugmakers. Cigna’s pharmacy profit supervisor, known as Specific Scripts, is among the three largest within the U.S.”
In the meantime, Wendell Potter, a former medical insurance govt, famous in a Substack submit on Nov. 28 that “Cigna and Humana, the 2 massive insurers the place I labored for practically twenty years, reportedly are in secret talks to hitch forces. The union–which might create an organization a lot nearer in measurement to UnitedHealthcare and CVS/Aetna, the fifth and sixth largest firms by income in America–possible would take form as an acquisition of Humana by Cigna.”
Potter wrote that there’s a pure match to this potential mixture. “Louisville, KY.-based Humana, which has been within the personal Medicare enterprise for greater than 40 years and has the second-largest enrollment in Medicare Benefit plans behind UnitedHealthcare, introduced earlier this 12 months that it’s getting out of the business medical insurance companies,” he famous, In the meantime, “Bloomfield, CT-based Cigna, in the meantime, is seeking to promote its Medicare Benefit enterprise, in accordance with Reuters. Most of Cigna’s well being plan enrollment by far over time has been within the employer-sponsored medical insurance market. Regardless of acquisitions of smaller firms that specialised in Medicare Benefit–and even a few of Humana’s MA enterprise in 2013–Cigna has by no means been capable of turn into greater than a bit participant within the Medicare area.”
And, he famous, “With Humana jettisoning its business enterprise and Cigna eliminating its current Medicare enterprise, the businesses would make the case to federal and state regulators that the mixed firm wouldn’t lower competitors in both the MA or business insurance coverage companies.”
In the meantime, James Fontanella-Khan and Ortenca Aliaj wrote on Wednesday in The Monetary Occasions that
“The 2 firms have employed advisers who’ve been discussing a money and inventory deal for greater than a month. They hope to get the transaction agreed earlier than the tip of the 12 months, the folks mentioned. A mixture between Cigna and Humana would assist the businesses compete with bigger rivals corresponding to UnitedHealth Group and Elevance Well being, previously often called Anthem,” they famous. “It will additionally mark the most important deal of the 12 months between two firms with a mixed enterprise worth of about $140bn, together with debt, in what has in any other case been a tepid mergers and acquisitions setting.”
