Walmart is the next big company looking to get into health insurance

Tubes socks and health insurance, all under one roof.
Tubes socks and health insurance, all under one roof.
Image: AP Photo/Sarah Bentham
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The world’s biggest company wants a slice of one of the world’s biggest industries.

Walmart is in talks to buy health insurer Humana, the Wall Street Journal reported (paywall). The retailer’s move into health care would be massive—Humana has a market cap of about $37 billion. The acquisition also would mark the latest effort by Walmart to counter the ambitions of Amazon.

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. 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.