Walmart is in early talks to acquire Humana

It has recently been reported that Walmart is in early talks to acquire Humana, following on from Aetna’s failure to acquire the company. Health insurance stocks rose upon the news breaking, whilst interestingly, shares in Walmart fell.

At present, the two companies are in close partnership, where Humana houses representatives within Walmart stores, as well as Sam Club brands and in store clinics in Texas, Georgia and South Carolina, but the deal will see Walmart expand its healthcare portfolio and cement its position within the industry by disrupting traditional models of care.

Healthcare companies and insurance providers are continually looking to consolidate to further drive down escalating healthcare costs. CVS Health’s $69bn acquisition of health insurer Aetna, and Cigna’s acquisition of Express Scripts are placing increased pressures on traditional services.

Additionally, new players such as Amazon are looking at ways to disrupt traditional ways of working through not only partnering with other multinational companies, such as Berkshire Hathaway and J. P. Morgan, but are also working on solutions of their own, with voice recognition technology, Alexa, being a key example, as well as exploring the pharmaceutical distribution market.

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"As the government seeks to give states more flexibility for Obamacare replacement plans, the Walmart-Humana partnership could open new, cost effective opportunities especially in rural locations where access to health care providers is challenging," commented Tracy Watts, US health reform leader at Mercer.

Consumers are increasingly looking for services that fit around their increasingly busy lives. Unsurprisingly, services such as telehealth and virtual services are rising in popularity and demand, where the use of digital tools is being embraced by all demographics.

Walmart will therefore gain the ability to further tap into this market, where its consumers will further trust its brand reputation and service offerings and will see consumers to pick up their weekly shop and prescriptions at the same time.

At present, Walmart owns a number of primary care clinics, and the deal would enable Humana to provide low-cost services within Walmart’s locations, and also provide further tailored solutions to the growing senior market. The company is currently one of the largest provider of Medicare Advantage Plans, leading shares to rise by over 10% upon the news release.