Pending a possible appeal, Aetna could soon be on the hook for a $1 billion “breakup” fee after U.S. District Court Judge John D. Bates blocked its proposed $37 billion acquisition of Humana.
Bates ruled in his decision announced Monday (Jan. 23) that the merger would reduce competition in the health insurance marketplace for consumers.
“In this case, the government alleged that the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges,” Bates wrote in a 156-page ruling. “After a 13-day (non-jury anti-trust) trial, and based on careful consideration of the law, evidence, and arguments, the Court mostly agrees.”
Judge Bates also noted in his ruling that Aetna pulled out of ACA exchanges in 11 of the 15 states where it had been offering coverage to give the impression Aetna and Humana were not competing in areas where the government argued that the merger would reduce competition.
An Aetna spokesperson said the company is “reviewing the opinion now” and is giving serious consideration to an appeal.
The would-be deal, announced back in July 2015, would have created the country’s largest seller of Medicare Advantage plans.
Experts are predicting Aetna would not be able to win an appeal, and are also saying the Trump Administration is unlikely to step in and make an effort to help the merger go through.
If the deal does indeed die, Humana could receive a $1 billion breakup fee from Aetna. Likely reflecting this, shares of Aetna (NYSE: AET) closed at $119.20 on Monday, down 2.72%, while Humana stock (NYSE: HUM) rose 2.24% to $205.02.
Meanwhile, U.S. District Judge Amy Berman is expected to issue a ruling later this month after presiding over the government’s pending antitrust case in late 2016 over the proposed $48 billion Anthem acquisition of Cigna, also announced in mid-2015.
A merger of those two “Big 5” health insurers would have created the nation’s largest health insurance company. If the feds scuttle that deal as well, Anthem would have to pay a $1.85 billion breakup fee to Cigna.
In that case, federal regulators argue that consolidation of the market for private health insurance for employers and individuals “would substantially lessen competition, harming millions of American consumers, as well as doctors and hospitals,” according to the Justice Department’s filing.
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• More Aetna-Humana coverage:
Modern Healthcare: Aetna faces slim chance of winning appeal of decision to block Humana merger
New York Times: Judge blocks Aetna’s $37 billion deal for Humana