The insurer giants are reportedly discussing combining once again after initial talks broke down last year.
Nearly one year removed from stalling out on a potential merger, Cigna and Humana have returned to the table, according to a report by Bloomberg.
The two sides have reportedly had informal discussions about combining that are in the early stages, people familiar with the matter told the outlet.
Though some of the same issues that likely kept a merger from taking place the first time around are still present, other circumstances have changed, which could clear the way for an agreement to be reached finally.
The Bloomberg report highlighted that Cigna wants to complete the sale of its Medicare Advantage business in the coming weeks before agreeing to other deals. It was announced in January that Cigna is offloading its Medicare unit to Health Care Service Corporation for $3.3 billion. The divestment likely affords Cigna a cleaner path to acquire Humana’s share of the MA market in the eyes of both investors and regulators.
Where regulators may still attack the merger is on the pharmacy benefit management (PBM) side, where Cigna holds a strong presence with its ownership of Express Scripts. Adding in Humana’s business would potentially create a concentrated market and trip up antitrust regulators.
The Federal Trade Commission is also fresh off issuing its final rule on premerger filings, which only increases the burden on transacting parties, as well as the scrutiny on deals.
In the wake of merger talks reportedly picking back up, investors didn’t appear to be any more eager than the first go-around. Cigna stock fell around 5%, while Humana shares slightly ticked up to 0.3%, indicating tempered expectations of a deal taking place. Cigna stock also dropped last year when the discussions were reported before picking back up when talks ended.
However, the combination of Cigna and Humana’s areas of focus would be largely complementary and allow the resulting organization to compete against peers UnitedHealth Group and CVS Health. Since merger discussions were put on ice last year, CVS in particular has dealt with its own struggles and is in the midst of a CEO changeover, making its future murkier.
Jay Asser is the CEO editor for HealthLeaders.
KEY TAKEAWAYS
Cigna and Humana have rekindled plans for a potential merger by holding informal, early-stage discussions, Bloomberg reported, citing people familiar with the matter.
Though stock movement suggested investors remain unenthused by a transaction, a potential deal may face less regulatory scrutiny this time.
Cigna’s divestiture of its Medicare unit likely makes it easier to absorb Humana’s Medicare Advantage business.