Humana Inc. (NYSE: HUM) and Cigna Group (NYSE: CI) have reportedly resumed conversations around a merger. The two companies discussed the possibility of a merger in 2023, but ultimately paused those conversations a few weeks later.
Bloomberg first reported resumed merger discussions between the two companies on Friday.
The news comes at a time when Humana’s stock is hovering near five-year lows. The Medicare Advantage (MA) rate environment has undoubtedly played a part in those struggles, as has the Centers for Medicare and Medicaid Services (CMS) lowering of Humana’s star ratings in MA.
Humana on Friday filed a lawsuit against the Department of Health and Human Services (HHS), which CMS operates within, over those drops in star ratings. Specifically, Humana is accusing regulators of using “arbitrary and capricious” decision making to lower its star ratings.
Along with UnitedHealth Group (NYSE: UNH) – which also saw a drop in star ratings for 2025 – Humana is one of the largest MA administrators in the country. It has about 8.7 million MA members in total.
The company is hoping that, if a judge sides with them in the lawsuit, their star ratings will be updated before year end. Star ratings affect payment for payers, and also influence member decisions when picking plans.
Cigna offloaded its MA business to Health Care Service Corporation earlier this year, in a move that could ease the antitrust concerns that would come with a Humana merger. Late last year, when the two were talking, there were also rumors that Walmart (NYSE: WMT) was also interested in acquiring Humana.
“We think two critical pieces of clarity are required for these merger talks to advance and for Humana’s stock to be correctly valued,” Scott Fidel, the managing director at the investment banking company Stephens, wrote in a note Monday. “First is the result of the elections; we would see deal talks only tangibly moving forward if Trump wins. Second will be the outcome of Humana’s appeals/legal challenge to its extremely dilutive 2025 STARs reductions, which may not be known for several months.”
Based in Louisville, Kentucky, Humana is one of the largest insurers in the country. In addition to its insurance business, it also offers health care services through CenterWell. CenterWell includes CenterWell Primary Care, CenterWell Pharmacy and CenterWell Home Health, which is one of the largest home health entities in the country.
CenterWell Home Health is currently working on a value-based home health model, which it believes will lay the groundwork for the future of non-traditional Medicare home health payment.
“Humana is in a unique position because of the investments that it has made, to measure and prove out the impact [of quality home health care],” Kirk Allen, the president of home solutions at Humana, recently told HHCN. “And to do it in a way that represents home health, MA and physician practices. I do think that can have an impact on the industry, and that’s why we are so excited about this value-based model.”
On its end, Cigna is based in Bloomfield, Connecticut, and is also one of the largest insurers in the country. It has a market cap of about $89.65 billion, while Humana’s market cap is about $31.21 billion. Cigna also owns Evernorth Health Services, which offers pharmacy services as well as behavioral health care.
If Humana and Cigna were to combine, it would create one of the largest health care companies in the country. It would also mean a shake-up for Humana’s home-based care assets, which may see a strategic change of course under a new organizational umbrella.
While many insurance companies now have some sort of home-based care focus, Humana is one of two insurers that owns home health assets directly. The other is UnitedHealth Group, which owns LHC Group and is in the process of acquiring Amedisys Inc. (Nasdaq: AMED).