Dive Brief:

• Cigna and Humana are in talks to merge, according to the Wall Street Journal.
• The two health insurers are discussing a stock-and-cash deal that could be finalized by the end of this year, WSJ reported on Wednesday, citing sources familiar. Talks could still fall apart, the sources said. A potential price tag for the deal was not shared.
• The merger would have major effects on the makeup of the U.S. health insurance industry, and would almost certainly face a challenge from the Biden administration’s more aggressive antitrust regime.

Dive Insight:

Cigna and Humana combined would have a scale large enough to rival healthcare behemoths like UnitedHealth and CVS, as health insurers continue to jockey for members and market share, especially in lucrative areas like retail health clinics, home care and the Medicare Advantage program.

Cigna currently has a market cap of $78 billion, while Humana has a market cap of $62 billion.

A deal between the two has been rumored since Reuters reported earlier this month that Cigna was exploring a sale of its Medicare Advantage business. The sale could clear up one stumbling block for the regulatory review of its merger with Humana, which is the second-largest Medicare Advantage insurer in the U.S. after UnitedHealth.

Cigna and Humana previously explored a merger in 2015, but the deal was scuttled. Two years later, Humana pursued a merger with Aetna that was blocked over antitrust concerns. Aetna was later acquired by CVS for $78 billion. 

Cigna and Humana focus on different areas of the health insurance system. The large majority of Cigna’s members are in commercial plans. The company also operates one of the largest pharmacy benefits managers in the U.S., Express Scripts, and has been building out its health services division, Evernorth.

Meanwhile, Humana started winding down its commercial business earlier this year to focus exclusively on plans in government-sponsored health programs like Medicare and Medicaid. By the time a deal with Cigna is ironed out, the payer could be completely exited from employer plans, removing another potential regulatory obstacle.

Humana — one of the first payers to pursue acquisitions of home care providers — has also recently prioritized expanding its senior-focused primary care and home healthcare capabilities.

Despite the divestitures, a tie-up between Cigna and Humana is likely to face a strict regulatory review — especially under new guidelines proposed earlier this year that experts say free up regulators to more aggressively crack down on healthcare deals.

Cigna and Humana did not respond to a request for comment by time of publication.