Cigna, Humana Eyeing a Merger

What do you call it when two hulking health insurance companies form a union? Insurance.

In a bid to scale up against larger rivals, health insurance players Cigna and Humana are in talks over a possible merger, according to a Wall Street Journal report on Wednesday.

Beefing Up

Cigna and Humana are both relatively small businesses (emphasis on relatively) compared to the industry’s top two companies, United Health and CVS Health. Last year, the latter two generated revenue of just over $320 billion, while Cigna and Humana generated about $181 billion and $83 billion, respectively.

But both companies have relatively narrow-scoped businesses, and, at least on paper, they’d each bring something to the table that the other sorely lacks:

• Cigna would bring its massive pharmacy-benefit unit, Express Scripts, which manages prescription drug plans. It also has a strong foothold in the commercial insurance sector.
• Humana, meanwhile, fills a longstanding hole at Cigna: a strong Medicare practice. Humana’s Medicare insurance unit is No. 2 in the industry, behind just UnitedHealth, while Cigna has barely cracked the sector.

Antitrust Me: With Cigna’s market cap of roughly $83 billion and Humana’s market cap of $62 billion, any deal — which the companies hope to complete before the end of the year, sources told the WSJ — would mark the largest M&A transaction of 2023. It’d also likely trigger an antitrust response. In fact, to pre-empt any action from the FTC, Cigna is already exploring a sale of its existing, albeit measly, Medicare Advantage unit. Even then, health insurance has faced particularly tough scrutiny in recent years. Cigna and Humana explored a merger in 2015, but that brief dalliance died when Humana instead agreed to a deal with Aetna — which itself ended up scuttled over antitrust concerns. Maybe the second time’s the charm?