22 August 2019
A Federal judge has ruled against Aetna's acquisition of Humana on Jan. 23. Photo: Bloomberg
A Federal judge has ruled against Aetna's acquisition of Humana on Jan. 23. Photo: Bloomberg

Aetna, Humana drop merger; Cigna wants to end Anthem deal

Health insurers Aetna Inc. and Humana Inc. walked away from their US$34 billion merger while Cigna Corp. sought to end its deal with Anthem, shelving the industry consolidation they charted to address former US President Barack Obama’s Affordable Care Act.

Humana also said it would exit the Obamacare individual insurance market after this year, noting that its membership for 2017 was showing signs of an overly expensive group.

It was already among insurers that had sharply cut back new members this year after losing money in 2016.

President Donald Trump and Republicans have vowed to repeal and replace Obamacare, the national healthcare reform law that created new individual insurance and expanded Medicaid, adding 20 million people to the ranks of the insured.

The insurers, in seeking their mergers, had said the combinations would help them grow after adjusting to changes related to the law in everything from how doctors and hospitals are paid to the benefits insurers must provide.

The Aetna-Humana and Cigna-Anthem deals were announced in July 2015, and the Justice Department filed a lawsuit a year later, saying they were illegal under antitrust law.

Federal judges hearing the cases ruled against Aetna’s acquisition of Humana on Jan. 23 and Anthem’s US$54 billion bid for Cigna on Feb. 8.

Government antitrust officials had argued that both deals would lead to less competition and higher prices for Americans.

The acquisitions would have reduced the number of large national US insurers from five to three.

After the defeat in court, Aetna and Humana initially said they were weighing an appeal. But they opted on Tuesday to scrap the proposed merger, sending Aetna shares up 3.2 percent to US$126.06, while Humana fell 0.3 percent to US$206.16.

Aetna will pay Humana a US$1 billion breakup fee, or US$630 million after taxes, and terminated its plan to sell some Medicare Advantage assets to Molina Healthcare Inc., the companies said.

Humana said its 2017 initiatives as an independent company would include at least US$2 billion in share buybacks and net profit of US$16.65 to US$16.85 per share due in part to the US$630 million after-tax payment from Aetna.

Humana is the first insurer to withdraw from the Obamacare exchanges for 2017, but Aetna and Anthem have both said they were waiting to see if lawmakers and the administration would make changes.

Cigna said on Tuesday that it had notified Anthem that it had terminated its merger and informed it that Anthem was required to pay a US$1.85 billion breakup fee.

It also said in a press release that it had filed a lawsuit in Delaware to ask a judge to declare legal its decision to terminate the deal.

The company is also seeking US$13 billion in damages to shareholders who did not receive the takeover premium because of the failed deal.

Anthem responded that the merger agreement was in place until April 30, 2017, and that Cigna could not back out.

Anthem’s share price dipped less than 1 percent to US$163.26 while Cigna was up less than 1 percent at US$145.97.

– Contact us at [email protected]


EJI Weekly Newsletter

Please click here to unsubscribe