Unpacking the Humana-Cigna Merger and Its Industry-Wide Impact

A Humana and Cigna merger would shake things up in the healthcare industry, creating yet another behemoth of an insurance company. While this potential merger may seem doable on paper, it could have significant consequence for physicians and patients.

In this article, I’ll briefly highlight stats on the two insurers, dive into how the two insurers compliment each other, and discuss the bigger “be-like-UnitedHealthcare” trend we’re observing throughout the industry.

The Deets

Humana and Cigna are reportedly exploring a merger which, if approved, would create an entity closer in size to other major incumbent competitors like UnitedHealthcare and CVS/Aetna.

Some general stats below:

If Humana and Cigna merge, they’d cover over 30 million lives and have a combined market cap of $140 billion. For reference, UnitedHealthcare’s market cap is around $500 billion.

A Perfect Match?

Humana and Cigna may compliment each other in terms of offerings:

• Humana is ditching their commercial insurance business to focus on government-sponsored health programs (Medicaid, Medicare Advantage).

• Cigna is trying to rid of their Medicare Advantage business to focus on its commercial business.

Humana and Cigna's strategic shifts in their insurance businesses reflect unique challenges in different segments of the health insurance market. For Humana, the declining commercial insurance population poses a challenge, whereas Cigna grapples with underperforming profit margins in Medicare Advantage and legal trouble (Cigna recently settled with U.S. prosecutors a $172 charge for overcharging MA programs, making their patient population seem sicker than they actually were).

It makes sense, then, that Humana and Cigna would join forces, given each is succeeding in areas where the other is struggling. Now, whether this merger (if it happens at all) would be approved by the FTC is another topic of discussion.

Dashevsky’s Dissection

While Humana and Cigna sort out their potential merger, let’s not forget that the State of U.S. health insurance is UnitedHealthcare—all other insurance companies are just trying to keep up with them.

To explain my point, you first need to know UnitedHealthcare’s key verticals, which touch every major segment of the healthcare system. Also note, they recently announced they have 90,000 physicians working for Optum Health!

Again: everyone wants to be like UnitedHealthcare. For example, CVS has Aetna (payer), Caremark (PBM), CVS specialty (specialty pharmacy), CVS pharmacy (regular pharmacy), Oak Street Health (health provider, recently acquired), Signify Health (home health). All CVS needs data solutions like Optum Insight, and then CVS will have completed the UHG Playbook.

Humana and Cigna are also emulating UnitedHealthcare's strategy. As a payer primarily concentrating on government-sponsored plans, Humana, upon merging with Cigna, would gain powerful commercial and PBM capabilities, positioning both insurers as a stronger competitor to UnitedHealthcare. Additionally, Humana operates provider segments, CenterWell Senior Primary Care and CenterWell Home Health, and a pharmacy branch, CenterWell Pharmacy. Blake Madden highlighted in a recent article that Humana possesses the nation's largest network of senior-focused primary care services.

The question remains: how will this merger, which brings Humana and Cigna closer to the likes of UnitedHealthcare, affect physicians and patients?

For physicians, this merger could mean navigating a larger, more complex bureaucracy, potentially affecting their autonomy and the way they manage care. Larger insurance entities often have more stringent policies and guidelines, which might limit physicians' flexibility in treatment options and patient care strategies. Additionally, a huge merger like this would increase the insurers negotiation power for commercial reimbursement rates, potentially decreasing physician reimbursement. On the other hand, a combined entity could offer more streamlined processes with economies of scale, but we know how this works in healthcare….

For patients, the merger could have mixed effects. It might lead to a more integrated and possibly more efficient healthcare experience, particularly for those needing a combination of commercial and government-sponsored healthcare services. But, there's a risk of reduced competition in the health insurance market, which could lead to higher premiums and out-of-pocket costs for patients.

In summary, the potential merger between Humana and Cigna represents a significant shift in the healthcare insurance landscape, aligning with the industry trend of emulating UnitedHealthcare's diversified model. This merger could create a larger entity with a strong presence in both government-sponsored and commercial markets. While this may enhance competitive positioning against giants like UnitedHealthcare and CVS/Aetna, it also raises concerns about increased bureaucracy and reduced flexibility for physicians, alongside potential impacts on patient costs and access to care. The balance between integrated, efficient healthcare services and the risk of reduced market competition remains a crucial aspect to consider in understanding the broader implications of this merger for the healthcare sector.