If Big Health Deals Are a Go, Why Not Anthem-Humana?

Humana, which saw a potential purchase by Aetna derailed by the government last year, offers a possible lifeline. It would give Anthem the potential to become a larger player in the rapidly growing Medicare Advantage market, it has a PBM that would bolster Anthem's nascent effort to build one of its own, and it's made diversifying investments in health care providers. Those factors could convince Anthem to gamble that constraints on merger enforcement or newfound Trump administration skittishness might extend to a horizontal deal.

It would be a risky move for sure, considering recent history. But President Trump doesn't have quite as large a political bone to pick in this case. The Department of Justice's antitrust boss literally worked for Anthem as it tried to buy Cigna. And the fact that both companies have been through the antitrust wringer may give them helpful experience for a second attempt.

This deal would create less market concentration than the two rejected insurer mergers. And while the combined company would be the second-largest Medicare Advantage insurer after UnitedHealth, it would have a smaller presence than a combined Aetna and Humana. Also, Humana would have a minimal impact on Anthem's commercial business, whereas a merger of Anthem and Cigna would have turned it from a giant in that space into a behemoth.

Of course, things could also go the other way. The DOJ could seize on this kind of deal as an opportunity at redemption, having successfully derailed similar mergers. A judge might not find Anthem's assurances that it wouldn't use increased market power to hike prices any more convincing this time around. Perhaps the first experience was so traumatic that one or both companies won't even consider it.

But there isn't another deal option I can see that would be as appealing or impactful, and any shift in perceived risk and reward could be enough to push Anthem into action.

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Max Nisen is a Bloomberg Gadfly columnist covering biotech, pharma and health care. He previously wrote about management and corporate strategy for Quartz and