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Insurers Cigna and Humana reportedly in talks to merge

A combined company would rival the size of juggernauts such as UnitedHealth Group and CVS Health.

Jeff Lagasse, Editor

Photo: Matt Mawson/Getty Images

Major insurers Humana and Cigna are exploring a possible merger that could exceed $60 billion in value, and would create a company worth about $140 billion based on each companies' respective market value as of Wednesday morning.

According to The , a stock-and-cash deal between Cigna and Humana could be finalized before the end of the year, aided by limited business overlap between the two companies, which entails mostly Medicare Advantage plans.

The likely reason for the proposed merger appears to be scale: A combined company would rival the size of giants such as UnitedHealth Group and CVS Health. WSJ reported that Cigna would be able to combine its strong commercial insurance and sizable pharmacy benefit unit, which manages drug plans, with Humana's clout in Medicare.

Humana may also help Cigna with a managed-care strategy that moves toward more of a value-based framework, with doctor and hospital payments that aren't based on volume ÔÇô a strategy that has been slow to advance among commercial insurance outfits.

According to , shares of Humana and Cigna slid after talks of the merger appeared on news outlets; Cigna shares fell 8.1%, while Humana dropped 5.5%. As of Wednesday morning, Cigna's market╠řvalue was about $83 billion while Humana's was about $62 billion.

Humana and Cigna did not immediately respond to a request for comment.

WHAT'S THE IMPACT?

Reuters that, if Cigna sells its Medicare Advantage business, as many expect,╠řthis may grab the attention of antitrust authorities, who could look at the impact on pharmacies and suppliers. Humana manages drug benefits for Medicare.╠řExpress Scripts, owned by Cigna, is one of the largest pharmacy benefit managers in the U.S.

A sale of Cigna's Medicare Advantage business could improve the deal's prospects, according to Reuters, although it appears likely antitrust authorities could challenge the merger.

Humana said in February it would be exiting its employer group insurance business in a "phased manner" throughout the course of the year and beyond, and would shift more of its focus to government-funded programs and specialty businesses.╠ř

Following a strategic review, the company determined that the Employer Group Commercial Medical Products business was no longer positioned to "sustainably meet the needs of commercial members" over the long term, or support the company's long-term strategic plans.

THE LARGER TREND

Humana and Cigna explored a merger once before, in 2015, but Humana instead pursued a deal with Aetna, which was blocked by a federal judge in 2017. The decision followed a federal court order that sided with the Department of Justice's argument that the deal would lessen competition in the Medicare and Medicare Advantage market.

Another deal, which would have combined Cigna and Anthem (now Elevance Health), was nixed after an antitrust ruling, resulting in Cigna seeking $13 billion in damages on top of the $1.85 billion it says it was owed in a contractual breakup fee.

Twitter: @JELagasse
Email the writer:╠řJeff.Lagasse@himssmedia.com