Cigna has set its sights on Humana and plans to close a cash and stock deal to acquire its fellow insurer before the year’s end, according to The Wall Street Journal. STAT News talked about this possibility several weeks ago, in the context of Cigna potentially selling off its Medicare Advantage (MA) business. Take that along with Humana’s February 2023 announcement of its planned exit from the commercial health insurance market, and you have two puzzle pieces that could potentially fit together. But even if they do, what does it mean?
From a customer experience (CX) perspective, this would be a merger of two unequals. Some of that’s by design: Humana’s book of business has been more heavily skewed toward MA than its competitors’ for years, and the government subsidization of MA plans makes it easier to roll out customer-friendly products for cost-conscious consumers. Humana’s Customer Experience Index (CX Index™) scores have placed the firm at the top of the US health insurer rankings for four out of the last five years, and this year, it became the first health insurer to earn a “Good” rating. On the other hand, Cigna has been mired in the “OK” range since ascending out of “Very Poor” territory in 2020.
From a regulatory angle, the two firms’ divestitures from the markets in which they currently compete could soothe regulators’ concerns. Regulators may also be enthusiastic about the possibility of a combined firm’s scale enabling more competition at the 800-pound-gorilla level of the healthcare space — where UnitedHealthcare and CVS Health play — with coverage in commercial and government markets, a pharmacy benefit manager, and healthcare delivery. Timing will likely be the key here: Even with Cigna exploring options to sell its MA business, Humana still has a long tail of commercial business that should run out before the end of next year. There’s also the issue of pharmacy benefits management, as both firms have their own PBMs; that will probably be a sticking point for regulators.
And what does this mean for consumers? That’s probably the toughest question, because the answer depends greatly on the strategy. There are at least three possibilities:
- Possibility #1: Cigna and Humana largely operate as an egalitarian marriage. If each firm brings its own strengths to the table and doesn’t change how the other operates (except to enable improvements as needed), then things could continue mostly business as usual for their members. Cigna members may see a boost if Humana is able to scale its care delivery to encompass them, as well.
- Possibility #2: Cigna lets Humana lead the way. In that case, Cigna puts Humana in the driver’s seat and lets the higher-rated insurer set the pace for CX. The latter has excelled at a human-first approach that centers its products and service on its members, so that could be a benefit for Cigna members. That said, this could require an employee experience boost for Cigna employees so that they have the same level of enablement and autonomy as their Humana counterparts.
- Possibility #3: Cigna establishes itself as the lead in this dance. If this comes to pass, Humana employees may see some of the similar challenges that I cited above for Cigna employees but in reverse. Humana employees used to a human-focused approach may chafe against the culture clash, and that could lead to service interruption or degradation.
So now what? If you’re a competitor, I strongly recommend going about your business regardless of how this deal does — or does not — proceed. It’s more important to run your own race than to focus too heavily on a merger that may not impact your market just yet. Additionally, copying the competition is the easiest way to fail at creating differentiation — particularly in a market where nearly half the brands in the CX Index are separated by a tiny 2-point margin — so it’s just about the last thing I’d recommend. Instead, I strongly urge that you focus on the key drivers of your firm’s customer experience and aim to make progress that helps you use CX to improve your top and bottom line.
Forrester clients looking for more specific advice should schedule a guidance session with me or one of my colleagues on the CX team to jump-start plans for 2024 and beyond.