Aetna, Humana officially kill merger

Health insurers Aetna and Humana have mutually ended their $37 billion merger agreement two weeks after a federal judge blocked the deal on antitrust grounds.

At the time, Aetna publicly said it was considering an appeal of the ruling. Instead, it will pay a $1 billion break-up fee to Humana (amounting to about $630 million after taxes) and drop the case.

“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,” Aetna Chairman and CEO Mark Bertolini said in a statement. “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.”

Aetna is also calling off a sale of Medicare Advantage assets to Molina, a move that was designed to assuage concerns about the Humana deal’s anticompetitive impact on the Medicare Advantage market.

Those arguments, like all in Aetna’s case defending the merger, didn’t sway U.S. District Judge John Bates. In his Jan. 23 ruling, he said the merger would eliminate “valuable head-to-head competition” and doubted customers would see savings from the deal.

“It is very likely that a significant share of the claimed efficiencies may be retained by the merged firm rather than being passed on to consumers,” Bates wrote.

Aetna didn’t say whether the termination of the deal affects its business plans for the Affordable Care Act exchanges in 2018 and beyond. The court ruling said Aetna’s decision to reduce its participation in 2017 was motivated in part by the federal government’s antitrust lawsuit. In a Jan. 31 conference call, Bertolini said the company had “no intention” of being in the insurance marketplace for 2018.