Dive Brief:
- Health insurance giant Humana, Inc. is thinking about selling the company, according to The Wall Street Journal.
- Among those reported to be interested are Aetna, Inc. and Cigna Corp.
- Humana is said to be working with advisers at Goldman Sachs Group, Inc. to help with the potential sale.
Dive Insight:
Industry bets have been on an Aetna acquisition—although some reports have Cigna as its target, not Humana. In an investor meeting at Aetna headquarters last month, Leerink Partners' Ana Gupte reported that Aetna CEO Mark Bertolini's asserted that "...government business is the focus for inorganic growth, while compatible cultures for post-merger synergies were viewed as the driver in all transactions, with cheap debt making either Aetna-Humana and Aetna-Cigna meaningfully accretive possibilities and imminent."
Anthem has also been linked to the possible acquisition, but that deal could face regulatory challenges because Humana's commercial business intersects with Anthem's in some markets (i.e., Kentucky).
If the Humana sale goes through, it could lead to a flurry of health insurance consolidation. Since the Affordable Care Act has created the potential for millions of new customers, insurers may now begin fighting for scale. "While impossible to predict timing, there is a consistent theme of consolidation being openly discussed by a number of management teams in the sector," J.P. Morgan analysts said in a recent research note. And the larger the companies get, the more leverage they'll have when negotiating rates with healthcare providers.
Last year, Humana reported $48.5 billion in revenue. In Q1 of 2015, its membership rose to 14.2 million customers and it saw an 18% increase in revenue. One of Humana's main selling points is its growing Medicare franchise, which should see continued growth as more and more Baby Boomers become eligible for Medicare.