Hartford, Connecticut-based Aetna once hoped that acquiring Louisville, Kentucky-based Humana would be a good way to help both companies respond to pressure to cut costs in the face of regulatory uncertainty. But a federal court judge recently granted a U.S. Department of Justice request to block the $37 billion deal. The judge concluded that the deal would weaken competition in the Medicare Advantage market without saving consumers much money.
Mark Bertolini, Aetna’s chairman, said in a statement that Aetna and Humana still believe the combined company would have created greater value for consumers, by making the combined company’s coverage better and more affordable.
But “the current environment makes it too challenging to continue pursuing the transaction,” Bertolini said.
Humana released a bare announcement of the breakup, without including any statement from its executives.
Humana has scheduled a conference call with investors on the deal termination for 4:45 p.m. Eastern time today. Companies usually post recordings of investor conference calls on their websites within a few hours after the calls end.
Aetna and Humana first announced the deal in July 2015.
Aetna acknowledged in its announcement that it owes Humana a $1 billion deal termination fee.
In an effort to meet antitrust requirements, Aetna was planning to sell some Medicare Advantage operations to another carrier, Molina Healthcare Inc. of Long Beach, California. Aetna is now canceling that deal, and it will have to pay termination fees to Molina, the company said.
A federal court recently ruled, in another antitrust case, against efforts by Indianapolis-based Anthem Inc., to acquire Bloomfield, Connecticut-based Cigna Corp.
New uncertainty about the future of the Affordable Care Act and federal support for Medicare might also make this a challenging time for insurers to make merger deals.
Under current ACA rules, for example, the ACA risk-adjustment program is supposed to shift cash from health insurers in a market that attract relatively healthy enrollees to their individual and small-group plans to insurers in the same market that attract higher-risk enrollees. Any changes, or decisions not to change, the risk-adjustment program could affect insurers’ strategies in the individual and small-group markets.
Similarly, proposals to deregulate individual health insurance, cap the tax exclusion for group health coverage and cap Medicare plan support could affect the value of insurers’ individual health, group health and Medicare plan operations, and insurers’ strategies for those operations.
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