The headline of the week – and possibly the year – goes to the Wall Street Journal’s scoop on the upcoming mega-merger between Cigna and Humana, which could create a new payor powerhouse before the end of next month.
Although “sources close to the matter” didn’t disclose the structure or terms, the combined company would be worth some $140 billion, making it the third largest player in the sector behind only UnitedHealth and Elevance.
Cigna hauled in upwards of $180 billion in revenue last year, mostly from its strong position in the commercial coverage market. The acquisition of Express Scripts in 2018 also made Cigna one of the biggest names in pharmacy benefits, and its Evernorth health services arm has been adding more fuel to the fire.
- The glaring white space in that portfolio happens to be one of the biggest growth engines for insurers, the Medicare segment.
- While Cigna’s been trying to build momentum in Medicare Advantage since picking up HealthSpring in 2011, just this month it announced that it’s “evaluating options” to offload its underperforming MA unit.
Humana is the second largest Medicare insurer, and last reported that its MA enrollment stands at about 5.9M members – 3x more than Cigna.
- On top of that, Humana’s CenterWell home-health business and growing network of primary care clinics give it a big leg up in managed-care and VBC, two areas that would complement Cigna’s Evernorth operations.
- Despite those strengths, last year’s revenue was about half of Cigna’s at ~$93B, and Humana recently announced that it would be shedding its commercial business to focus on its core MA line.
It’s worth noting that this isn’t the first time Cigna and Humana have considered merging, but previous attempts circa 2015 either fell apart or were blocked on antitrust grounds. This time around, with Cigna exiting Medicare at the same time that Humana bails on commercial, the pair seem to be building a decent case that a merger wouldn’t decrease competition.
The Takeaway
Joining forces would vault Cigna and Humana into the top tier of integrated healthcare firms, not to mention give the M&A market a much needed jolt with 2023’s biggest transaction across all industries. We’ll apparently have all the details in the next few weeks, followed by what’s sure to be a lively antitrust case.
