Merger Blocked of Health Insurance Titans Aetna and Humana

By William Vogeler, Esq. on January 26, 2017 | Last updated on March 21, 2019

Citing antitrust violations, a federal judge has blocked Aetna's $37 billion purchase of Humana, Inc.

U.S. District Judge John D. Bates said the deal would violate antitrust laws by reducing competition among insurers. Under the proposed merger agreement, Aetna now owes Humana a $1 billion breakup fee.

The insurance companies' lawyers scrambled Tuesday to chart out the next course of action. Aetna is considering an appeal, but also is concerned about the prospects for a pending $48 merger with Cigna Corp.

Govenrment lawyers, meanwhile, are caught mid-step in the transfer of power in Washington. The Obama administration started the ligitation against the Aetna-Humana deal, and they are waiting for a decision on the Anthem-Cigna case

"Little Chance" Anthem-Cigna Goes Through

"If the judge blocked this deal, there is very little, if any, chance that the Anthem-Cigna deal gets cleared," Jason McGorman, a Bloomberg analyst told Bloomberg News.

The Aetna-Humana case arose after the companies entered into a merger agreement on July 2, 2015. They notified the Department of Justice of the planned merger, as required by the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

Following an investigation, the Department of Justice, eight states, and the District of Columbia filed this action asserting that the merger "may ... substantially ... lessen competition" in violation of section 7 of the Clayton Act, for individual Medicare Advantage plans and individual commercial health insurance plans in specific areas.

Substantially Lessen Competition

In issuing an injunction against the companies, Bates concluded that the proposed merger was likely to "substantially lessen competition in Medicare Advantage" in 364 counties and in the public exchanges identified in the complaint.

According to reports, the merger would have allowed Aetna to cover more than 4 million senior citizens and capture the biggest market share of Medicare Advantage plans. Aetna and Humana are among the largest insurers for individual insurance plans sold in the public exchanges created by the Affordable Care Act.

Stock in all the insurance companies involved with the Aetna deals dropped with news of the injunction. The Department of Justice, on the other hand, said the ruling will save taxpayers roughly $500 million a year.

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