(Bloomberg) — Cigna Group and Humana Inc. are in talks a few potential money and stock combination to create one other giant of the medical medical insurance industry, people conversant within the matter said.
Most Read from Bloomberg
The timing and structure of a possible tie-up isn’t clear, based on the people, who asked to not be named discussing non-public information. Representatives for the two corporations didn’t immediately reply to messages searching for comment.
A mixture could create a powerful challenger to rivals UnitedHealth Group Inc. and CVS Health Corp. Yet the dimensions of the mixture still wouldn’t approach that of UnitedHealth Group Inc., crucial insurer with a market value of nearly half a trillion dollars. Cigna’s market cap is about $80 billion while Humana’s is roughly $63 billion.
Cigna shares fell as much as 7.3%, essentially probably the most intraday since August, while Humana was down 3.2% at 1:34 p.m. in Latest York. The news sent rival Centene Corp., which had been seen as one other potential goal for Cigna, down as much as 6.7%.
If consummated, the deal would shrink the range of publicly traded national health insurers from six to five and provides the mixture more negotiating leverage in coping with hospitals or Medicare, said Glen Losev, an analyst at Bloomberg Intelligence.
“Medical medical insurance is a scale business,” Losev said. “They’d have more ability to expand their profit margins.”
Complementary Features
The two corporations have some complementary features, Losev said. Cigna owns Express Scripts, one amongst crucial managers of pharmacy benefits, while Humana is one amongst the biggest providers of plans that manage private versions of Medicare, the US health program for seniors. Cigna’s Medicare business is small by comparison. Humana has said it’s going to stop selling employer coverage, where Cigna is strongest.
The combination would still likely face antitrust hurdles in an industry where some have been blocked by regulators. Those include a proposed tie-up between Cigna and Anthem, now Elevance Health Inc., and a separate deal for Humana to combine with Aetna.
Cigna Chief Financial Officer Brian Evanko said at a conference this month that any proposed mergers must have “a high probability of closing,” a position that the company has long held.
The discussions of a deal were reported earlier by the Wall Street Journal, which cited people conversant within the matter.
The last major wave of industry consolidation took place about five years ago when CVS closed its near-$70 billion deal for Aetna.
–With assistance from Fiona Rutherford and Gerry Smith.
Most Read from Bloomberg Businessweek
©2023 Bloomberg L.P.