Walmart Inc. told Talk Business & Politics the company does not “comment on rumors and speculation,” but rumors of a possible acquisition of insurance provider Humana by the world’s largest retailer were enough to move the market heading into the Easter holiday weekend.
The Wall Street Journal reported late Thursday (March 29) that Walmart and Humana officials were in “early-stage acquisition” talks. The WSJ said those close to the issue provided information about the talks.
Louisville, Ky.-based Humana is estimated to be the fifth-largest U.S.-based insurance provider, with just under 52,000 employees and about 13 million customers. The company has a market cap of $37.122 billion. By comparison, Walmart has a $263.56 billion market cap.
In after hours trading, the Humana (NYSE: HUM) stock market price jumped more than 10%. The Wall Street Journal report was published Thursday after the equity markets closed.
If Walmart were to acquire Humana, it not only would be the biggest deal ever for the retailer, but would follow an emerging trend of deals between retailers, healthcare companies and health insurance providers.
CVS Health Corp. in December announced plans to buy Aetna – a company similar in size to Humana – in a $69 billion deal. Market watchers said the deal could give CVS greater ability to capture market share by providing better deals to consumers while also improving profit margins. Likewise, health insurance company Cigna announced earlier this year plans to acquire Express Scripts Holding Co. in a $54 billion deal. Express is the nation’s largest prescription benefits management company.
While not an acquisition deal, Amazon made waves earlier this year in announcing a partnership between J.P. Morgan and Berkshire Hathaway to better manage employee health benefit plans. The effort, geared toward slowing or halting rising benefit plan costs, included possible acquisitions of generic drug companies. According to the Kaiser Family Foundation, health insurance premiums have skyrocketed 55% in the last decade. Much of the increase, according to Kaiser, has been paid for by employees being asked to share more of the premium burden.
Separate from acquisitions, Walmart has been active in efforts to reduce healthcare costs for its employees and customers.
Walmart began in 2016 to experiment with in-store clinics in select areas where healthcare access is limited. Walmart has said the rural clinics serve customers and employees, and they help control costs for primary care.
Lisa Woods, Walmart’s senior director for US Healthcare, has said the company has been aggressive in addressing healthcare costs for employees and customers. She said if the company couldn’t impact and influence the increasing costs, then they may consider doing something to change the status quo.
Also, Walmart created Accountable Care Organizations (ACO) two years ago. They limit consumers to a smaller group of care providers. The plans also include financial incentives for doctors and hospitals. For example, if employees are treated effectively for chronic conditions such as diabetes, heart disease or even cancer screenings, doctors and hospitals would be eligible to receive an incentive.
Walmart said hospital admissions and emergency room visits have declined within the ACOs, but visits to primary care doctors are up. While it is too early to assess whether the company has saved money, premiums are lower with ACO plans, according to a Bloomberg News report.