Following the lead of CVS Health Corp. and Cigna Corp., Walmart Inc. has entered into talks to buy insurer Humana Inc.
If the Walmart-Humana deal moves forward, the Arkansas-based retailer would also become one of the nation’s largest health insurers, with a massive stake in Medicare plans. This new role in the healthcare industry could increase Walmart’s engagement with its key demographic: seniors. In addition, this marriage might also make it possible for more Walmart employees to have access to quality, affordable health insurance.
Getting More of the Pharmacy Dollar (and Data)
In a world where data is almost as valuable as cash, Walmart’s move to purchase Humana is a sly one.
Not only will the retailer have access to customer insurance data, it will know what medications they’re buying, what type of foods they’re eating and what other purchases they make. It might not seem like a useful jumble of information, but every drip of data in this world is valuable in some way. For example, Walmart-Humana might offer discounts for seniors who buy a lot of apples and take statins. All those heart-healthy apples could reduce their risk to the insurance side, increasing profits overall.
Even if this isn’t the plan for Walmart, a marriage to Humana will keep the retail giant competitive in a market where Amazon is looking into creating its own insurance plan and other major insurance companies are seeking shelter with pharmacy and retail companies. Walmart already operates some primary care clinics and intends to work with a major laboratory service for in-store lab testing.
Humana Merger Still a Long Way Off
Unfortunately, experts expect it to cost $50 billion or more to buy Humana straight out, which may require the Walton family to liquidate some of their shares and give up their 50-percent shareholder stake.
Since they went to great effort to buy back shares to reach that point in the 2000s, it seems unlikely they’d be willing to part with those stakes to raise the needed funds. On the other hand, the retail giant is fairly cash poor at the moment, with just under $7 billion in cash and short-term investments, not nearly enough to purchase Humana with no strings attached.
This Walmart-Humana deal is one to watch, it’s hard to say what’s about to happen here. If regulators let the deal proceed, Walmart may surprise everyone.