The new partnership between CIGNA
Both companies are in the health insurance business, but their clients are different enough that joining forces makes sense. Much of CIGNA's business is managing insurance for large employers, and Humana has a large offering of Medicare Advantage plans for retirees.
The new product will combine those two strengths by offering a single product for companies that offer insurance to both current employees and their retirees. The duo will split the profits evenly from the products that will be available in July. That is, as long as antitrust regulators don't have a problem with the partnership.
The partnership should help Humana close the gap with UnitedHealth Group
For CIGNA, the partnership offers an additional way to monetize its clients. A complete package with a single point of contact could also help CIGNA compete for corporate clients against other large insurers like UnitedHealth, WellPoint
Health insurance reform has thrown a kink in health insurers' business plans. The changes will likely cut into margins, which companies will have to make up for with increased volume. Investors should be on the lookout for companies that can develop new products either through partnerships or acquisitions to help relieve the pressure on margins. So far, CIGNA and Humana seem like a yummy combination.