Why the Cigna-Humana deal made little sense at first

The Cigna Group confirmed Monday that it is “not pursuing a combination with Humana.”

Despite speculation in some media, including the Wall Street Journal, Such a deal actually made little sense to begin with, especially given Cigna’s decision to get out of the Medicare business. Cigna is nearing completion of the sale of its Medicare business to Health Care Service Corp. early 2025.

Humana operates one of the nation’s largest Medicare businesses and sells a range of products for seniors, including Part D drug plans and Medicare Advantage plans that contract with the federal government to provide coverage available in traditional Medicare, plus additional benefits and services to seniors, such as disease management and nursing assistant hotlines, some of which also offer vision, dental and wellness programs.

As Humana and other health insurers, including CVS Health and UnitedHealth Group, struggle with higher medical costs for seniors enrolled in Medicare Advantage, Cigna’s smaller Medicare business has helped the company avoid some of these problems.

Cigna announced this on Humana speculation ahead of meetings with investors and analysts in a company announcement on confirming ‘capital priorities’.

“During these meetings, The Cigna Group expects to reconfirm expected full-year 2024 consolidated adjusted operating income of at least $28.40 per share and adjusted earnings per share of at least 10% in 2025,” Cigna said. “Additionally, in light of recent and ongoing speculation, The Cigna Group expects to communicate that the company will not pursue a combination with Humana Inc. pursues. Cigna Group remains committed to its established M&A criteria and would only consider acquisitions that are strategically aligned, financially attractive and have a high probability of closing.”

Humana, which this year has Medicare Advantage and Medicare Advantage prescription drug plans in 2,907 counties in 49 states plus Washington, D.C. and Puerto Rico, will reduce its footprint to have Medicare Advantage and prescription drug plans in 2,852 counties in 48 states plus Washington and Puerto Rico.

Meanwhile, the terms of Cigna’s deal with Health Care Service call for the operator of five Blue Cross and Blue Shield plans in the giving states to buy Cigna’s Medicare Advantage plans, Cigna supplemental benefits, Medicare Part D drug benefits and CareAllies, a company that helps, takes over medical care. service providers with various administrative services and contracting.

Chicago-based Health Care Service operates Blue Cross and Blue Shield health plans in Illinois, Texas, Oklahoma and New Mexico, with more than 18 million health plan enrollees nationwide, and is looking to expand its Medicare Advantage product offerings. minimal compared to other major health insurers.

Cigna said Monday that it will use “the majority of the proceeds from the sale of its Medicare business, which is expected to close in the first quarter of 2025, for share repurchases, leaving $5.3 billion remaining on the approval for the share buyback.”

Cigna is a major provider of commercial health insurance and one of the largest providers of employer coverage in the country. Cigna also operates major pharmacy benefits manager Express Scripts and folds it into the company’s Evernorth Health Services business, which includes a growing portfolio of medical providers.

“The Cigna Group continues to deliver shareholder value through focused execution of its stated operational and financial objectives, and through disciplined capital deployment, including dividends and share repurchases,” the company said. “Specifically for share repurchases, the company has repurchased $6 billion of shares to date, including $1 billion in the fourth quarter so far.”