Walmart is in talks to buy health insurer Humana, the Wall Street Journal reported. For Walmart, buying Humana would be another volley in its ongoing battle with online giant Amazon, which is reportedly considering selling prescription drugs.
The Wall Street Journal report cautioned that there was no guarantee that the deal would materialize. But the move would make sense at a time when retailers are increasingly moving into the health care space, and business moguls such as Warren Buffett and Amazon founder Jeff Bezos are looking at how to make medical services more efficient and less expensive for their employees.
Amazon is joining with JPMorgan Chase and Berkshire Hathaway in an endeavor to provide healthcare for their hundreds of thousands of employees, and is said to be exploring entering the pharmacy and primary care businesses.
There has been much speculation about other insurance companies or retailers eyeing a tie-up with Humana. Insurer Aetna was a suitor, though the proposed merger with Humana was scrapped after a federal judge ruled it would limit competition.
Concern about Amazon’s forays into healthcare has set off a scramble among retailers and insurers. So far, it’s led to CVS’s planned acquisition of Aetna and Cigna’s effort to buy ExpressScripts, a pharmacy-benefit manager.
Americans spent $3.3 trillion on healthcare in 2016, or $10,348 per person. It’s roughly 18% of the nation’s gross domestic product, dwarfing retail’s 6% share. As Amazon expands into bigger and higher margin sectors, Walmart is scrambling to keep up.
In many ways, Walmart is already far ahead of Amazon in healthcare. Most of its nearly 5,000 US stores have pharmacies, and it has primary care clinics in its stores in a handful of southern states. Humana is one of the country’s largest providers of Medicare Advantage, a government funded drug benefit for senior citizens, and it would make sense for Walmart to merge that population with its pharmacy and clinic customers.
Walmart may have another reason to enter the insurance business, too. The company is raising pay and benefits for its 1.5 million US employees as it competes for workers in a tightening labor market. Being able to provide its own employees with better health insurance at a lower cost would be a significant advantage.