Cigna and Humana reportedly seeking a second chance at a deal

Health insurance giants Cigna and Humana are reportedly renewing their attempt at a merger, nearly a year after they called off a similar deal.

Bloomberg reported that discussions over Cigna’s possible purchase of Humana have resumed after the two health insurers failed to strike a deal last year.

Humana’s stock hit multiyear lows earlier this month, Investopedia reported, after the Centers for Medicare and Medicaid Services said the quality rating of one of its Medicare Advantage plans, which accounts for nearly half of its MA memberships, fell to 3.5 stars down from 4.5 stars last year. Higher star ratings generate bonus payments for the insurers that offer plans that earn them. Humana is suing CMS over the rating.

Cigna looks to close $3.3B sale

Meanwhile, Cigna is looking to close the $3.3 billion sale of its Medicare Advantage business to Health Care Service Corp., which was announced last January. Cigna’s offloading of its Medicare component would likely make a merger with Humana more likely to pass muster with regulators.

Humana is the No. 2 provider in the Medicare Advantage space, with 18% of the market – about 5.5 million enrollees, KFF reports. Meanwhile, Cigna holds about 2% of the Medicare Advantage market, with 600,000 enrollees.

Both companies have significant capabilities in the health care services space. Humana owns CenterWell, which includes home health care, primary care and pharmacy services. Cigna owns Evernorth Health Services, which offers pharmacy services as well as behavioral health services.

Cigna also owns Express Scripts, the second-largest pharmacy benefit manager in the nation, while Humana owns the fourth-largest PBM.

A merger of the U.S. health insurance giants would create an industry leader valued at nearly $140 billion, according to Bloomberg.

Although Humana has a large piece of the Medicare Advantage pie, the company isn’t strong on commercial and employer coverage, while Cigna has a strong presence in those areas. Meanwhile, Cigna has found success selling individual coverage in the Affordable Care Act marketplace.

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