It is not news the FTC wants because they generally HATE the idea of insurer mergers but it may be the news they get. Word got around to the Wall Street Journal that HUM and CI are in merger talks yesterday. CI got hammered, HUM a little less so.
Notwithstanding the usual patellar reflex from Lina Kahn et al, the deal makes some sense. HUM is, for all practical purposes, a pure play Medicare Advantage carrier. CI's sweet spot is the commercial market. The combination, Medicaid aside, looks more like first in - or at least a head of - class, UNH. We have previously pointed out that CI can, and appears to be growing their commercial book by taking share from the weaker Blues plans that cannot compete without anti-competitive practices. Since 2021, the commercial business is also experiencing some endemic growth as the millennial population gets more serious about household formation.
CI also has its finger on the pulse of the drug channel via its Express Scripts segment. Federal legislation is making that business bob and weave but their nimbleness is legendary. They also have a birds eye view of the drug channel that will be important to HUM as the Part D benefit redesign starts to kick in next year.
HUM's Medicare Advantage enrollment, including what appears to be solid conversion of stand-alone PDP members to MA-PDP, has been well above industry trends, helped by their retention of higher star ratings. Their problem is that the growth of people aging into Medicare is slowing as the last of the post-war cohort turns 65 in a couple of years. From here forward it is a knife fight for new members with the back-up options of enticing plan switching - something that usually is only stimulated by a change in benefit design - and encouraging abandonment of FFS. The change in the Part D benefit design is sure to help the last of those things but the market is extremely crowded.
In the deal, CI would get into the payvider space via HUM's Centerwell segment.
As far as the FTC is concerned, these companies occupy different corners of the vast health insurance industry. Could there be an anti-trust angle around the drug channel? Perhaps. But, as far as typical anti-trust concerns like we saw back in 2015-17, this deal is different.
Let me know what you think or hit me via Calendly and we can discuss.
