Information Media Studies: Cigna, Humana in Merger Talks

Well being insurer giants Cigna and Humana are in merger talks, in accordance a variety of stories media experiences 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 acquainted with the matter stated on Wednesday, a deal that might exceed $60 billion in worth and would be sure to draw fierce antitrust scrutiny. The discussions come six years after regulators blocked mega-deals that may 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 amass Anthem — now often called Elevance Well being. Dropping the authorized battle additionally induced Aetna — now owned by pharmacy chain operator CVS Well being (CVS.N) — to desert a $37 billion deal to amass 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 acquainted with the matter, they reported that Cigna and Humana are discussing an all-cash deal that may be finalized by the top of 2023, in line 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 house: UnitedHealth Group and CVS Well being, they famous. They usually famous that the deal would give Cigna, and its large pharmacy profit supervisor Categorical Scripts, a a lot bigger foothold within the scorching Medicare Benefit market. The 2 insurers did focus on the potential to merge in 2015, although a deal didn’t come collectively, in line 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 prompt {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 doubtless 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 deal with separate ends of the medical insurance market, which might present a rationale for the merger. Humana is without doubt one of the largest sponsors of Medicare Benefit plans, a well-liked different to conventional Medicare underneath which the federal authorities pays non-public firms to handle the well being advantages of U.S. seniors. Cigna, in the meantime, is among the many largest gamers within the industrial 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 look 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 doubtless be wanted for the deal to go antitrust muster. Humana, in the meantime, stated in February that it deliberate to exit the industrial insurance coverage enterprise. Each firms have in-house pharmacy profit managers, which negotiate immediately with drugmakers. Cigna’s pharmacy profit supervisor, known as Categorical Scripts, is without doubt one of the three largest within the U.S.”

In the meantime, Wendell Potter, a former medical insurance govt, famous in a Substack put up on Nov. 28 that “Cigna and Humana, the 2 massive insurers the place I labored for practically 20 years, reportedly are in secret talks to affix 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–doubtless 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 non-public Medicare enterprise for greater than 40 years and has the second-largest enrollment in Medicare Benefit plans behind UnitedHealthcare, introduced earlier this yr that it’s getting out of the industrial medical insurance companies,” he famous, In the meantime, “Bloomfield, CT-based Cigna, in the meantime, is seeking to promote its Medicare Benefit enterprise, in line with Reuters.  Most of Cigna’s well being plan enrollment by far through the years 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 in a position to turn into greater than a bit participant within the Medicare house.”

And, he famous, “With Humana jettisoning its industrial 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 industrial insurance coverage companies.”

In the meantime, James Fontanella-Khan and Ortenca Aliaj wrote on Wednesday in The Monetary Instances 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 top of the yr, the folks stated.  A mix between Cigna and Humana would assist the businesses compete with bigger rivals reminiscent of UnitedHealth Group and Elevance Well being, previously often called Anthem,” they famous. “It might additionally mark the most important deal of the yr 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 atmosphere.”