Humana filing stirs speculation about impending M&A

Humana building
One analyst thinks Cigna is the most likely candidate to acquire Humana, though such a deal would require some divestitures to pass regulatory scrutiny.

Humana, ever a ripe acquisition target despite its doomed deal with Aetna, could be readying for another merger.

Such is the speculation that has swirled following Humana’s recent filing (PDF) with the SEC, which updates the insurer’s “change-in-control” policy. Put simply, that policy specifies the severance that top executives will receive if they are terminated following a sale of the company.

In a statement emailed to FierceHealthcare, Humana spokesman Tom Noland said that the company's change-in-control approach had not been refreshed since 2011, adding that the revision "aligns us with market best practices." But Leerink Partners analyst Ana Gupte thinks the insurer has a larger goal in mind.

To her, the filing suggests that Humana is a possible takeout target after the annual enrollment season for Medicare Advantage concludes. Should a transaction occur, Cigna would be the most likely buyer—though it would need to divest its Health Spring Medicare Advantage plans to satisfy antitrust regulators, Gupte wrote in a research note (PDF). 

Humana has long been seen as an attractive candidate for acquisition given the large amount of market share it has in the booming Medicare Advantage sector.

Other “dark horse acquirers” of Humana could include either Anthem, Walmart or Walgreens, Gupte wrote. While the two retailers might seem like odd candidates to purchase a health insurer, such a deal makes sense considering CVS Health is said to be in talks to acquire Aetna.

Purchasing a health insurer could help CVS, Walmart or Walgreens gain new business by steering that insurer’s members to their pharmacies—an even more attractive prospect given the increased competition they’d face if Amazon enters the drug-distribution business.

There’s an upside for insurers too, as industry forces are increasingly pushing them toward closer ties with both pharmacies and pharmacy benefits managers. In fact, Anthem recently announced plans to create its own PBM that will be serviced by CVS—though CVS’ possible acquisition of Aetna could complicate that arrangement.

Meanwhile, if either Cigna or Anthem decides to purchase Humana, the company will be entering into a deal with an acquirer that has a poor track record when it comes to executing a major insurer merger. While both the Aetna-Humana and Anthem-Cigna deals were blocked by a federal judge, only the latter transaction was marked by bad blood between the two companies that contributed to the merger’s ultimate failure.

In fact, Anthem sued Cigna to get the company to stay in their merger contract after a judge ruled against the deal, as Cigna refused to pursue an appeal. Ultimately, Anthem terminated the deal last May after a judge ruled that Cigna was free to walk away.

Editor's Note: This article has been updated to include comment from Humana.