Cigna Group shares CI, -7.77% fell more than 7% and Humana Inc.’s HUM, -4.56% stock fell 3% Wednesday after the Wall Street Journal reported that the managed-care providers are in talks to combine in a stock-and-cash deal that could be finalized before the year’s end.
The Journal report cited people familiar with the matter.
“Humana is not commenting on the deal rumor,” a company spokesperson told MarketWatch. Cigna did not immediately respond to a request for comment on the report.
The deal would combine two insurance behemoths: Cigna’s market value stands at about $ 83 billion, while Humana’s is about $ 62 billion.
The combination would also meld Humana’s strength in Medicare Advantage with Cigna’s dominance in the pharmacy-benefit-management business. Humana has about 18% of total 2023 Medicare Advantage enrollment, second only to UnitedHealth Group Inc. UNH, -0.76%, while Cigna has just 2% of total enrollment in those plans, according to the health-policy research nonprofit KFF.
Cigna’s Express Scripts unit, meanwhile, is a top pharmacy benefit manager by market share. PBMs, which negotiate between drug companies and health insurers and can significantly influence patients’ and insurers’ prescription costs, have been scrutinized this year by lawmakers and regulators looking to shine light on their contracts and pricing practices.
Some previous attempts at insurance-industry mega-deals have been beset by regulatory problems. A court blocked Aetna’s proposed acquisition of Humana on antitrust grounds in 2017. Aetna was later acquired by CVS Health Corp. CVS, -2.57%. Another health insurer, Anthem, tried to acquire Cigna, but that deal was also blocked in 2017 due to antitrust issues. Anthem later changed its name to Elevance Health Inc. ELV, -1.77%.
Cigna’s stock is down 20% in the year to date, while Humana shares are down 3.5%.