News Media Reports: Cigna, Humana in Merger Talks

Health insurance giants Cigna and Humana are in talks to merge, according to a series of media reports that began appearing Wednesday afternoon, Nov. 29. Reuters’ Anirban Sen and Deena Beasley reported Wednesday afternoon“American health insurer Cigna (CI.N) is in talks to merge with its peer human (HUM.N), a source familiar with the matter said Wednesday, a deal that could exceed $60 billion in value and would surely draw fierce antitrust scrutiny. The discussions come six years after regulators blocked megadeals that would have consolidated the U.S. health insurance sector. After U.S. courts upheld antitrust challenges in 2017, Cigna walked away from a $48 billion deal to acquire Anthem, now known as Elevance Health. Losing the legal battle also caused Aetna, now owned by pharmacy chain operator CVS Health (CVS.N), to abandon a $37 billion deal to acquire Humana.”

The first media report came from Lauren Thomas, Anna Wilde Mathews and Laura Cooper, who broke the story The Wall Street Journal at 4:28 p.m. ET on Wednesday. Citing people familiar with the matter, they reported that Cigna and Humana are discussing an all-cash deal that would be finalized by the end of 2023, according to the report. Cigna has a market value of $83 billion and Humana’s market value is $62 billion, allowing a combined entity to rival the largest players in this space: UnitedHealth Group and CVS Health, they pointed out. And they noted that the deal would give Cigna, and its huge pharmacy benefit manager Express Scripts, a much larger position in the Medicare Advantage market. The two insurers discussed the possibility of merging in 2015, although no agreement was reached, according to the report.

AND, as Josh Nathan-Kazis and Emily Dattilo wrote in Barron on Wednesday, “A report earlier this month that Cigna was shedding a potentially contentious division suggested a deal was in the works. He Diary The article has strengthened expectations that a transaction is on the way. A combination of Cigna and Humana would likely be the second-largest publicly traded health insurer in the U.S., after UnitedHealth Group,” Nathan-Kazis and Datillo noted that Cigna’s market value is $83.7 billion, while Humana’s is $62.8 billion. UnitedHealth’s is $500 billion,” adding that “the two companies focus on separate ends of the health insurance market, which could provide justification for the merger. Humana is one of the largest sponsors of Medicare Advantage plans, a popular alternative to traditional Medicare under which the federal government pays private companies to administer health benefits for older Americans. Meanwhile, Cigna is among the largest players in the commercial insurance market. “Any deal would face close scrutiny from regulators,” they added. “In 2017, a federal judge blocked a merger between Humana and Aetna after the Justice Department raised antitrust concerns. Companies already appear to be preparing for possible objections.”

What’s more, they noted, “Reuters reported in early November that Cigna is considering selling its Medicare Advantage business. Humana dominates that part of the market, so a sale would likely be necessary for the deal to pass antitrust review. Meanwhile, Humana said in February that it planned to exit the commercial insurance business. Both companies have in-house pharmacy benefit managers, who negotiate directly with drug manufacturers. Cigna’s pharmacy benefit manager, called Express Scripts, is one of the three largest in the US.”

Meanwhile, Wendell Potter, a former health insurance executive, noted in a Substack post on November 28 that “Cigna and Humana, the two big insurers where I worked for almost two decades, are supposedly in secret talks to join forces. The merger, which would create a company much closer in size to UnitedHealthcare and CVS/Aetna, the fifth and sixth largest companies by revenue in the United States, would likely take shape as an acquisition of Humana by Cigna.”

Potter wrote that there is a natural fit for this potential combination. “Louisville, KY.-based Humana, which has been in the private Medicare business for more than 40 years and has the second-largest enrollment in Medicare Advantage plans behind UnitedHealthcare, announced earlier this year that it will exit the Medicare business. commercial medical insurance. Meanwhile, “Bloomfield, Connecticut-based Cigna is looking to sell its Medicare Advantage business, according to Reuters. Most of Cigna’s health plan enrollments over the years have occurred in the employer-sponsored health insurance market. “Despite acquisitions of smaller companies that specialized in Medicare Advantage, and even some of Humana’s MBA businesses in 2013, Cigna has never been able to become more than a minor player in the Medicare space.”

And, he noted, “with Humana divesting its commercial business and Cigna divesting its existing Medicare business, the companies would argue to federal and state regulators that the combined company would not lessen competition in either the MA or commercial insurance businesses. “

Meanwhile, James Fontanella-Khan and Ortenca Aliaj wrote on Wednesday financial time that
“The two companies have hired advisors who have been discussing a cash and stock deal for more than a month. They hope to close the transaction before the end of the year, the people said. A combination between Cigna and Humana would help the companies compete with larger rivals such as UnitedHealth Group and Elevance Health, formerly known as Anthem,” they noted. “It would also mark the largest deal of the year between two companies with a combined enterprise value of about $140 billion, including debt, in what has otherwise been a tepid M&A environment.”

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