As initially reported by the Wall Street Journal, health plan giants Cigna and Humana are exploring the option of a possible merger in a deal that would combine Cigna's USD 83 billion entity with Humana's USD 62 billion entity. The report mentions that the financial terms of the merger could be finalized by the end of 2023.

Once news of the possible merger broke, shares of both companies saw their values fall during intraday trading on the same day. Cigna’s share value fell by 8%, while Humana’s share value fell by 5.5%. The companies had previously explored a merger once before in 2015, but the deal was not finalized.

While possible, this deal could possibly face antitrust scrutiny given the size of the rumored deal. In 2017, Cigna attempted to merge with Elevance Health (then operating as Anthem), only to be blocked by federal courts. Similarly, Humana Health previously attempted to merge with Aetna in 2017 in a deal that was again blocked by federal courts. Both deals were struck down due to their potential to foster an anti-competitive market.  

Analyst Quicktake: In the wake of the emergence of multiple for-profit health system players, providers have been under pressure to seek alternative measures to remain competitive. As such, some major players have looked to M&As; CVS’ acquisition of Aetna in 2018 and Cigna’s merger with Express Scripts in the same year are two such examples. Cigna and Humana’s rumored deal would help both players compete with other giants, such as UnitedHealth Group and Elevance Health, by giving entities like Cigna’s Express Scripts a wider market reach.