Nov 30, 2023 - Health

The antitrust tripwire for health insurers Cigna and Humana

Cigna Group headquarters photo

Photo: Joe Buglewicz/Bloomberg via Getty Images.

A deal reportedly brewing between health insurance giants Cigna and Humana will likely face antitrust challenges over their respective pharmacy benefit management businesses, experts tell Axios.

Details: The combination would be huge. Cigna is now valued at $78 billion and Humana is at roughly $60 billion.

  • With 35 million members between them, the combined company would have the scale to rival UnitedHealth Group and CVS Health.

What they're saying: The companies' respective insurance businesses may not trigger antitrust concerns, since Cigna is more focused on the private market while Humana is centered on government business, including Medicare Advantage.

  • Cigna is reportedly exploring a sale of its Medicare Advantage business, which investors see as preparation for a possible Humana bid, wrote TD Cowen analyst Gary Taylor.
  • "We actually think antitrust concerns could be alleviated in the medical insurance part of this deal since there would be very little overlap that couldn't be solved by divestitures," Julie Utterback, a senior equity analyst for Morningstar, wrote in an email to Axios.

Yes, but: That "leaves an elephant in the room," Taylor wrote — PBMs.

  • "Given the extraordinary regulatory scrutiny of PBMs, this aspect of the deal seems certain to be challenged," he said.
  • Utterback said it was hard to imagine Cigna giving up Express Scripts, the country's second-largest PBM, which it acquired for $54 billion in 2018. At the same time, it would be hard for Humana to divest of its PBM, which largely serves its own customers.
  • "It gets trickier on the PBM side of things where we are unsure of how a deal could be structured to satisfy regulators," Utterback wrote.

Flashback: Humana and Cigna flirted with the idea of merging in 2017 after regulators struck down their deals to combine with Aetna and Anthem, respectively.

Yes, but: Insurance behemoth UnitedHealth Group, the largest in the U.S with more than 47 million enrollees, would still eclipse a combined company.

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