Aetna, Humana terminate $37 billion merger

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HARTFORD, Conn., and LOUISVILLE, Ky. — After being blocked by a federal court, Aetna Inc. and Humana Inc. have decided to terminate their $37 billion merger deal.

The health insurance giants said Tuesday that, with the move, Aetna will pay Humana a $1 billion breakup fee. Aetna said it also has ended its agreement to sell certain Medicare Advantage assets to Molina Healthcare Inc. and will pay fees for the termination of that deal.

“While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” Aetna chairman and chief executive officer Mark Bertolini. “We are disappointed to take this course of action after 19 months of planning, but both companies need to move forward with their respective strategies in order to continue to meet member expectations. Our mutual respect for our companies’ capabilities has grown throughout this process, and we remain committed to a shared goal of helping drive the shift to a consumer-centric health care system.”

ACA sign_Rite Aid LevittownHumana didn’t issue a statement with the merger termination announcement Tuesday morning but said it planned a press conference later in the day.

“On behalf of Aetna, I would like to thank everyone involved in the transaction for their commitment to improving how health care is delivered,” Bertolini added.

In January, Judge John Bates of the U.S. District Court for the District of Columbia ruled in favor of the Department of Justice’s request to enjoin the Aetna-Humana merger. The government claimed that the combination of the two health insurers would lessen competition, harming seniors who buy private Medicare coverage and some consumers who buy health insurance on public exchanges. At the time, Aetna and Humana said they would “carefully consider all available options” in response to the ruling.

Likely influencing the decision to forgo Aetna’s planned acquisition of Humana was a federal court ruling last week to block another health insurer mega-merger: Anthem Inc.’s $48 billion deal to acquire Cigna Corp.

Anthem said last Thursday that it plans to file a notice of appeal and request an expedited hearing of its appeal to reverse the Feb. 8 U.S. District Court ruling so the company could proceed with the acquisition, which it noted was approved by over 99% of the votes cast by Anthem and Cigna shareholders.

“Anthem is significantly disappointed by the decision, as combining Anthem and Cigna would positively impact the health and well-being of millions of Americans — saving them more than $2 billion in medical costs annually,” stated Joseph Swedish, chairman, president and CEO of Indianapolis-based Anthem. “Anthem has been a leader in providing individuals with access to high-quality, affordable health care. Our decision to acquire Cigna is grounded in our commitment to this goal and to leading our industry during this period of dynamic change. If not overturned, the consequences of the decision are far-reaching and will hurt American consumers by limiting their access to high-quality affordable care, slowing the industry’s shift to value-based care and improved outcomes for patients, and restricting innovation which is critical to meeting the evolving needs of healthcare consumers.

“Moving forward, Anthem will continue to work aggressively to complete the transaction while remaining focused on serving as America’s valued health partner, delivering superior health care services to our approximately 40 million members with greater value at less cost,” Swedish added.

If the merger is terminated, Anthem would have to pay Cigna a $1.85 billion breakup fee under the terms of the agreement.

“Cigna intends to carefully review the opinion and evaluate its options in accordance with the merger agreement,” Bloomfield, Conn.-based Cigna stated on Thursday. “Cigna remains focused on helping to improve health care by delivering value to our customers and clients and expanding our business around the world.”

The consolidation wave hitting the health insurance sector has been seen as a byproduct of the Affordable Care Act. The mega-deals would provide fast access to the millions of people who have gained health coverage under the ACA and would be a vehicle for capturing Medicaid business, which has expanded dramatically under the health reform law.

Outside of new business resulting from the ACA, the newly enlarged insurers also would be able to go after the growing rolls of Medicare Advantage plans, which are private versions of the federal insurance for seniors. Medicare Advantage enrollees are among pharmacies’ biggest consumers, given that four out of five older adults live with one or more chronic ­conditions.

But as insurance executives have said, the climate for mergers and acquisitions in the health care sector has become uncertain. Besides the DOJ’s opposition to the mega-mergers, the Trump administration and Republican leaders in Congress have begun efforts to dismantle the ACA. That has cast a cloud on the health insurance marketplace, since it remains unclear what would replace the ACA and how consumers who have obtained coverage via the exchanges would continue to receive benefits.



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