In what could be an industry-redefining move, reports have emerged that Humana Inc. (NYSE: HUM) and The Cigna Group (NYSE: CI) are in advanced talks to merge. If the deal comes to fruition, the health insurance merger would create a colossal entity that not only dominates nearly every aspect of the health insurance industry but also creates a formidable force in clinical and health services, with a particularly prominent focus on behavioral health.
According to Wendell Potter, a former insider at both companies, the deal would see Cigna acquiring Humana. A report from The Wall Street Journal has since indicated that a deal could be finalized by the end of 2023, though neither company has officially confirmed the talks. Humana declined to comment on the matter, and Cigna, as of now, has remained silent.
A Powerhouse in Health Insurance and Clinical Services
If the merger moves forward, the resulting company would command about 12% of the U.S. health insurance market, placing it alongside Elevance Health (NYSE: ELV) as the second-largest player, only behind UnitedHealth Group (NYSE: UNH). This would make the new entity an unparalleled force in the sector, with significant stakes in both business-to-business (B2B) and direct-to-consumer (D2C) health services. The deal would mark a transformational shift in the way the U.S. healthcare system operates, combining insurance with extensive clinical and health service offerings under one massive umbrella.
Humana, headquartered in Louisville, Kentucky, is best known for its Medicare Advantage plans and government-backed health benefits, serving a large segment of the senior population. In addition to its core health insurance business, Humana runs CenterWell, a network that includes home-based care, hospice, pharmacy dispensing, and outpatient primary care through its CenterWell Senior Primary Care and Conviva Care Centers brands. The CenterWell clinics also include behavioral health services, offering seniors access to behavioral health specialists as part of a broader care team. With about 300 clinics across 15 states as of September 2023, Humana plans to expand this number by opening up to 100 additional locations by the end of 2025.
Cigna, based in Bloomfield, Connecticut, has a business model that’s more heavily weighted toward its health services arm, Evernorth. This division, which includes its pharmacy benefit manager (PBM) Express Scripts, is the primary revenue driver for the company, accounting for 77% of Cigna’s total revenue in 2022. Cigna has also made significant investments in behavioral health, expanding its behavioral health provider network by 30% in the past year. Evernorth offers a broad range of behavioral health services through platforms like MDLIVE, a telehealth solution, and a growing network of virtual providers, including NOCD and Pelago (formerly Quit Genius). Cigna has also seen a massive uptick in demand for behavioral health services, noting a historic increase in the utilization of these benefits.
Cigna’s behavioral health services are available to a vast portion of its customer base—25.1 million of its 164 million customer relationships were tied to behavioral health services in the third quarter of 2023. This represents the largest segment of Cigna’s customer relationships and underscores the growing importance of mental health and addiction services in the company’s overall business strategy.
Behavioral Health: A Key Focus of the Health Insurance Merger
The merger between Humana and Cigna would not only create one of the largest insurance companies in the world but also solidify the combined entity as a dominant force in behavioral health care. Behavioral health services have become an increasingly vital component of the U.S. healthcare system, and both companies have made significant strides in expanding their offerings in this area.
Humana’s CenterWell clinics already provide integrated behavioral health services as part of a comprehensive care model that includes physicians, nurses, care coaches, and social workers. These services are particularly crucial for the senior population, who are disproportionately affected by mental health conditions such as depression and anxiety.
Similarly, Cigna has expanded its behavioral health offerings through its Evernorth division, where behavioral health services play a central role. The company’s investments in virtual care platforms and partnerships with behavioral health providers like NOCD and Pelago underscore the growing demand for convenient, accessible care in a post-pandemic world. As more people seek out virtual mental health services, both Humana and Cigna are well-positioned to capitalize on this trend.
With behavioral health utilization increasing and consumer demand for mental health services on the rise, the health insurance merger would create a significant opportunity for the combined entity to become a leader in this critical space. It would offer a range of virtual and in-person behavioral health services to millions of Americans, making it easier for patients to access the care they need, regardless of their location.
Antitrust Concerns and Regulatory Scrutiny
While the health insurance merger between Humana and Cigna promises to create a massive health insurance and services entity, it will also face intense regulatory scrutiny. The U.S. government, particularly under the Biden administration, has signaled an increased focus on antitrust issues and the potential for monopolistic practices in the healthcare sector. In July 2023, the White House issued new guidelines on merger oversight, specifically calling out the healthcare industry for issues such as “monopolistic labor markets” and concerns about the market power of large healthcare entities.
The Biden administration has also signaled a strong interest in addressing behavioral health parity, with a proposed rule to increase the quality of care in Medicaid. Given the increasing role that behavioral health plays in both Humana’s and Cigna’s businesses, the health insurance merger could trigger further regulatory scrutiny regarding its potential impact on competition in the behavioral health space.
To preempt antitrust concerns, Humana and Cigna may opt to divest certain parts of their businesses that overlap, such as Humana’s commercial health insurance division and Cigna’s Medicare Advantage plans. These moves could help address potential concerns that the merger would reduce competition in these critical areas, particularly as they would be seen as consolidating market share in the Medicare Advantage and employer group health insurance markets. This strategy would aim to placate regulators by reducing the likelihood of anti-competitive behavior, particularly in areas where the companies have significant overlap.
What’s at Stake for Consumers?
For consumers, the potential health insurance merger could yield a range of benefits, particularly in the area of behavioral health care. With an enhanced clinical and insurance infrastructure, the combined company could provide greater access to mental health services, especially to underserved populations. The expansion of virtual care services and the integration of behavioral health into primary care settings could improve patient outcomes and make it easier for individuals to seek the help they need.
However, there are also risks to consider. With two of the largest health insurance companies in the U.S. merging, there may be concerns about reduced competition, particularly in markets where Humana and Cigna are dominant players. Fewer players in the market could lead to higher premiums and fewer options for consumers, which could have a negative impact, particularly for those seeking affordable care options.
The merger could also lead to changes in the availability and pricing of services, particularly for individuals with complex health needs. The consolidation of such a large portion of the health insurance market could raise questions about the balance of power between insurance companies and healthcare providers, potentially leading to higher costs and fewer choices for patients.
Conclusion: A Defining Moment for the Healthcare Industry
If completed, the health insurance merger between Humana and Cigna would mark a transformative moment in the healthcare sector. The creation of such a massive entity would solidify the importance of behavioral health within the broader healthcare system while also creating potential challenges in terms of competition and regulation.
For consumers, the health insurance merger could offer enhanced access to a wide range of health services, especially in the growing field of behavioral health. However, the deal’s potential impact on market competition and pricing remains a major concern for many, especially as the Biden administration’s scrutiny of healthcare mergers continues to intensify.
As the merger talks move forward, all eyes will be on Humana, Cigna, and regulators to determine whether this deal will proceed and what its implications will be for the future of health insurance and behavioral health services in the U.S. If approved, the merger could serve as a blueprint for the future of healthcare in America, blending insurance, clinical services, and behavioral health in new and innovative ways.
