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QQQ   438.03 (+-0.01%)
AAPL   182.77 (-0.87%)
MSFT   409.65 (-0.49%)
META   488.07 (+0.40%)
GOOGL   143.83 (-0.18%)
AMZN   174.67 (+0.05%)
TSLA   193.44 (-2.01%)
NVDA   801.70 (+2.08%)
NIO   5.47 (-6.50%)
AMD   175.98 (-3.23%)
BABA   76.12 (+0.00%)
T   16.77 (+1.08%)
F   12.16 (+0.33%)
MU   86.04 (+0.15%)
CGC   3.25 (-3.56%)
GE   153.42 (+1.15%)
DIS   107.08 (-0.52%)
AMC   4.50 (+1.81%)
PFE   27.85 (+1.09%)
PYPL   59.22 (+1.49%)
XOM   103.62 (-1.09%)
QQQ   438.03 (+-0.01%)
AAPL   182.77 (-0.87%)
MSFT   409.65 (-0.49%)
META   488.07 (+0.40%)
GOOGL   143.83 (-0.18%)
AMZN   174.67 (+0.05%)
TSLA   193.44 (-2.01%)
NVDA   801.70 (+2.08%)
NIO   5.47 (-6.50%)
AMD   175.98 (-3.23%)
BABA   76.12 (+0.00%)
T   16.77 (+1.08%)
F   12.16 (+0.33%)
MU   86.04 (+0.15%)
CGC   3.25 (-3.56%)
GE   153.42 (+1.15%)
DIS   107.08 (-0.52%)
AMC   4.50 (+1.81%)
PFE   27.85 (+1.09%)
PYPL   59.22 (+1.49%)
XOM   103.62 (-1.09%)
QQQ   438.03 (+-0.01%)
AAPL   182.77 (-0.87%)
MSFT   409.65 (-0.49%)
META   488.07 (+0.40%)
GOOGL   143.83 (-0.18%)
AMZN   174.67 (+0.05%)
TSLA   193.44 (-2.01%)
NVDA   801.70 (+2.08%)
NIO   5.47 (-6.50%)
AMD   175.98 (-3.23%)
BABA   76.12 (+0.00%)
T   16.77 (+1.08%)
F   12.16 (+0.33%)
MU   86.04 (+0.15%)
CGC   3.25 (-3.56%)
GE   153.42 (+1.15%)
DIS   107.08 (-0.52%)
AMC   4.50 (+1.81%)
PFE   27.85 (+1.09%)
PYPL   59.22 (+1.49%)
XOM   103.62 (-1.09%)

Mega merger in the works? Humana, Cigna explore big deal

Health insurance Stocks

Key Points

  • Shares of health insurers Humana and Cigna saw an uptick on December 1 on news of potential merger talks.
  • Cigna's emphasis on commercial insurance aligns with Humana's dominance in the Medicare market.
  • The companies are hoping to close the transaction before the end of 2023. 
  • 5 stocks we like better than Humana

Consolidation in the health insurance industry has become a theme of 2023. Humana Inc. NYSE: HUM is reportedly in talks to merge with The Cigna Group NYSE: CI in a stock-and-cash deal. According to reports, the companies are hoping to fast-track the merger and get it completed before the end of the year. 

Already in 2023, UnitedHealth Group Inc. NYSE: UNH, the largest of the healthcare stocks tracked in the Health Care Select Sector SPDR Fund NYSEARCA: XLV, acquired home health provider LHC for $5.4 billion. 

Humana and Cigna shares were both trading higher on December 1.

Regulators would carefully examine deal

A merger of these two companies would create a health insurance behemoth, something federal regulators would certainly examine closely.

Humana’s market capitalization is $59.74 billion, while Cigna’s is $78.34 billion. It’s unclear if the combination would be structured as a merger, or if one company would be the acquirer. Either way, the joint entity would have a market value of around $137 billion, going by December 1 market values. 

The combined entity would still be much smaller than UnitedHealth, whose market cap is $510.59 billion. It would be larger than CVS Health Corp. NYSE: CVS, which has a market cap of $87.61 billion. 

In 2018, CVS acquired health insurer Aetna for $69 billion. 


Previous health insurance merger attempts

Although Cigna and Humana would, quite understandably, prefer to close a deal as quickly as possible, regulators have previously put the kibosh on proposed health insurance mergers. 

In 2016, the U.S. Department of Justice stopped two planned mergers. Anthem, now known as Elevance Health Inc. NYSE: ELV, attempted to acquire Cigna for $54 billion, and Aetna proposed buying Humana for $34 billion. The DOJ cited the higher prices as a reason for stopping those deals. 

If a Cigna and Humana deal were to close before year-end, it would be the largest merger-and-acquisition transaction this year, coming in ahead of Exxon Mobil Corp.’s NYSE: XOM proposed acquisition of to acquire Pioneer Natural Resources Co. NYSE: PXD, announced in October. 

There would be several benefits of a merger for both Cigna and Humana.

Complementary strengths 

Cigna operates a sizeable pharmacy benefits management business, and also has significant market share in the commercial insurance arena. Combining that with Humana’s rapidly growing Medicare business would be a win for both companies.

A merger with Cigna could also add momentum to so-called “value-based care,” which offers financial and other incentives to motivate providers to improve patient outcomes, while also giving providers greater flexibility when it comes to which services they provide and when.

Currently, physicians and hospitals are compensated according to the volume of care they provide, regardless of the outcome. 

These value-based care arrangements are growing in popularity with Medicare plans, but are being adopted more slowly by commercial plans.  

Humana could also help Cigna accelerate a strategy that is core to the managed-care business, a move toward paying doctors and hospitals in ways that aren’t tied to the volume of service provided. These “value-based care” setups are increasingly central to Medicare plans, but have advanced far more slowly in commercial insurance.

Cigna has a greater market share in commercial insurance, while Humana is stronger in the Medicare market, meaning the two companies could form a winning combination. 

Cigna paring down ahead of merger

To help assuage regulators’ concerns about a merger, Cigna has reportedly been looking into a sale of its Medicare Advantage unit, which could command several billion from a buyer. Cigna began that process before news broke about a possible merger with Humana. 

Within the managed medical care sub-industry within the healthcare sector, Molina Healthcare, Inc. NYSE: MOH is showing the greatest price strength relative to industry peers. 

UnitedHealth and Centene Corp. NYSE: CNC are also outperforming the pack. 

The Cigna chart shows the stock attempting to form a handle out of a cup base, but that momentum broke down following the company’s earnings report in early November. 

The Humana chart shows a similar cup-with-handle breakdown. 

As a group, health insurers are in the lower half of sub-industries, in terms of 12-month performance. 

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Should you invest $1,000 in Humana right now?

Before you consider Humana, you'll want to hear this.

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Companies Mentioned in This Article

CompanyMarketRank™Current PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Humana (HUM)
4.9976 of 5 stars
$363.07-1.4%0.98%18.32Moderate Buy$506.72
The Cigna Group (CI)
4.9065 of 5 stars
$344.16+0.6%1.43%19.79Moderate Buy$357.15
Centene (CNC)
4.2009 of 5 stars
$79.84-0.3%N/A16.26Moderate Buy$83.57
Exxon Mobil (XOM)
4.7431 of 5 stars
$103.75-1.0%3.66%11.67Moderate Buy$127.53
Health Care Select Sector SPDR Fund (XLV)N/A$147.72+0.4%1.35%15.12N/AN/A
Molina Healthcare (MOH)
4.2419 of 5 stars
$407.26+0.7%N/A21.69Moderate Buy$380.80
Pioneer Natural Resources (PXD)
3.2393 of 5 stars
$232.11-0.8%2.15%11.08Hold$254.19
UnitedHealth Group (UNH)
4.8883 of 5 stars
$526.310.0%1.43%22.08Moderate Buy$575.79
Compare These Stocks  Add These Stocks to My Watchlist 

Kate Stalter

About Kate Stalter

  • stalterkate@gmail.com

Contributing Author

Retirement, Asset Allocation, and Tax Strategies

Experience

Kate Stalter has been a contributing writer for MarketBeat since 2021.

Additional Experience

Series 65-licensed investment advisor, financial advisor, Blue Marlin Advisors; investment columnist for Forbes, U.S. News & World Report

Areas of Expertise

Asset allocation, technical and fundamental analysis, retirement strategies, income generation, risk management, sector and industry analysis

Education

Bachelor of Arts, Saint Mary’s College, Notre Dame, Indiana; Master of Business Adminstration, Kellogg School of Management at Northwestern University

Past Experience

Founder, financial advisor for Better Money Decisions; editor, stock trading instructor for Investor’s Business Daily; columnist, podcast host, video host for MoneyShow.com; contributor for Morningstar magazine


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