Humana's Steady Course Presents Opportunities and Challenges

From Health Plan Weekly

Humana Inc. has outlined a conservative, steady course for investors after abandoning a proposed acquisition by Aetna Inc. last year — up until now, anyway. A March 29 Wall Street Journal report indicated that the managed Medicare specialist might be in merger talks with Wal-Mart Stores, Inc.

Industry consultants tell AIS Health that Humana's steady strategy may present opportunities and challenges.

"As a business model, Humana is going to plug right along, is going to do fine, is going to produce reasonable returns...but it isn't going to turn into a mega-company," says Stephen Wood of Clear View Solutions, LLC, a management consultancy focusing on government-sponsored health insurance programs.

He further explained that as "a respected competitor to our clients," Humana offers good products, a solid footprint in discrete markets, loyal customers and a keen knowledge of retail sales and direct-to-consumer marketing skills.

Yet Wood asserts Humana's strategy in the marketplace has limitations. "[It] doesn't really have knock-me-over growth and integration... and there aren't a lot of new markets" for expansion, he says.

Ashraf Shehata, a principal in KPMG's health care life sciences advisory practice, also questions the insurer's Medicare focus. "Can you sustain yourself with Medicare products? Or, in an age of megadeals [and vertical and horizontal] mergers, do you need more than that?...I feel that's a reasonable question."

Last year's failed merger between Humana and Aetna has a lingering effect, Shehata says. Though the deal did not work out, Humana and Aetna still have the desire to scale for better positioning in the marketplace. Shehata also sees opportunities for Humana and other health insurers extending into other areas, such as retail and direct-to-consumer efforts.

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