- Walmart Inc. is in early talks to acquire Humana Inc., The Wall Street Journal reports citing anonymous sources and noting a range of options are on the table.
- The companies already partner on Medicare Part D drug plans, but a deal between the two could potentially boost Humana's group market offerings to compete on the national stage with other major insurers, a Mercer analyst suggests.
- Still, other sources, including in an article by Bloomberg, suggest a merger is the least likely option. Other possibilities include expansion of the companies' existing partnerships.
Humana has gone big with the senior market as the second biggest provider of Medicare Advantage plans. The Louisville, Kentucky-based insurer has 3.5 million MA enrollees and 4.9 million in Part D drug plans.
Walmart is the biggest private employer in the U.S. with 1.5 million employees and more than 5,000 stores. The company has 2.3 million employees globally and had $485.9 billion in total revenue last fiscal year.
The emergence of the potential Walmart-Humana deal comes on the heels of several other mega-mergers in the offing. CVS Health Corp. and Aetna Inc. are working through a $69 billion merger the companies expect to close by the second half of this year.
Cigna Corp., meanwhile, is in the process of a $67 billion deal to acquire Express Scripts Holding Co. by the end of the year.
Also, Amazon.com Inc., J.P. Morgan Chase & Co. and Berkshire Hathaway Inc. are in discussions to form a company aimed at addressing rising healthcare costs for their employees.
The potential Walmart-Humana tie-up may be most similar to the Aetna-CVS combination.
Walmart already operates pharmacies and primary care clinics, and is actively working to offer laboratory tests as well. It also contracts directly with providers — including Geisinger Health System and Mayo Clinic — through its Centers of Excellence Network to reduce the number of unnecessary spinal surgeries its employees undergo.
By providing access to healthcare in retail locations closer to patient's homes, Walmart may be able to stem headwinds from online sales growth, they suggest.
While CVS' Minute Clinic is "more mature," Walmart's average customer age of 50 and its greater store space may lend flexibility to what services it can provide, according to the Jefferies analysts.
Humana announced in 2017 that it would pull out of the Affordable Care Act individual markets to focus on its Medicare population as more baby boomers age. Payers have had notable success in the MA market with its steady stream of customers and overall stability. Enrollment grew 8% from 2016 to 2017 and is expected to reach 20.4 million members this year.
The insurer previously attempted to merge with Aetna, but the deal fell apart after a federal court raised concern the merger would "substantially lessen" competition in Medicare Advantage and ACA markets.
Tracy Watts, U.S. health reform leader at Mercer, speculates the deal could create new access to health programs for uninsured rural populations.
"As the government seeks to give states more flexibility for Obamacare replacement plans, the Walmart-Humana partnership could open new, cost effective opportunities especially in rural locations where access to health care providers is challenging," Watts said.
The deal also comes as hospitals have continued to consolidate in light of reduced reimbursement and other pressures.