Aetna, Humana Call Off $37 Billion Merger; Cigna Sues Anthem for $13 Billion

Additional reporting by Laura JosztNOTE: This story was updated at 3:40 pm and at 6:02 pm.

Aetna and Humana have called off their planned $37 billion merger, following a federal judge’s ruling to halt the deal.

“While we continue to believe that a combined company would create greater value for healthcare consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction,” said Aetna Chairman and CEO Mark T. Bertolini in a statement.

Following the ruling, Humana has decided to exit the Affordable Care Act (ACA)'s insurance exchanges, making it the first major insurer to do so. In a press release, the company stated that it continues to see "signs of an unbalanced risk pool" following 2017's open enrollment period. As such, Humana will exit the ACA exchanges on January 1, 2018. It will continue to serve members across 11 states for the remainder of 2017.

On January 23, 2017, A US District Court granted the US Department of Justice (DOJ) request to block the Aetna-Humana merger on the grounds that it was anticompetitive. In a separate ruling February 9, 2017, a federal judge blocked another large proposed merger between Anthem and Cigna.

In both cases, the DOJ asserted that the mergers would leave some markets with too few choices for consumers seeking health plans.

Under the terms of the original deal, Aetna will pay Humana a $1 billion fee to terminate the deal. Aetna will also halt the sale of some Medicare Advantage assets to Molina Healthcare; this will also require payouts to Molina. The sales were pursued to avoid too much consolidation in certain markets.

Had the 2 mergers gone through, the number of large national payers in the country would have dropped from 5 to 3.

In December, the DOJ criticized Aetna’s behavior when it pointed to internal documents that it said showed Aetna’s decision to withdraw from all but 4 states on the federal exchanges was motivated by the antitrust action, not financial concerns. The federal exchanges sell coverage under the ACA, and 2017 premium increases and a loss of coverage options in many markets were attributed to Aetna’s decision.

Bertolini said during testimony that he expected the merger could have produced $3 billion in efficiencies and savings. The deal would have given the combined company the largest presence in the Medicare Advantage market, which the DOJ said would have resulted in higher premiums for seniors.

On Tuesday, Cigna also announced that it was terminating the proposed merger with Anthem and also filing a lawsuit against Anthem. In addition to the $1.85 billion termination fee that was part of the merger agreement, Cigna is seeking additional damages exceeding $13 billion. According to a statement from Cigna, the damages include the premium Cigna shareholder will not realize as a result of the failed merger.

"Cigna is disappointed in the outcome of this process," the company released in a statement.

After the judge ruled on February 9, Anthem had remained committed to pursuing the merger.

Moving forward, Anthem will continue to work aggressively to complete the transaction..." Anthem President and CEO Joseph R. Swedish had said in a statement the day of the ruling.

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