February 14, 2017

Aetna, Humana call off merger plans

Daily Briefing

Aetna and Humana on Tuesday announced that they will not appeal a federal judge's decision to block their proposed merger, effectively ending their merger agreement.

The megamerger would have made Aetna the nation's second-biggest insurer by revenue.

The Department of Justice (DOJ) had challenged the merger in court, arguing that it would have violated federal antitrust law by reducing competition in the Medicare Advantage (MA) and Affordable Care Act exchange markets. U.S. District Judge John Bates in a ruling last month wrote that he "mostly agree[d]" with DOJ's arguments and blocked the deal.

Aetna, Humana end agreement

The insurers on Tuesday said they agreed to a "mutual termination" of the deal.

Aetna CEO Mark Bertolini said, "While we continue to believe that a combined company would create greater value for health care consumers through improved affordability and quality, the current environment makes it too challenging to continue pursuing the transaction." He added, "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 said it also will end its agreement to sell some of its MA assets to Molina Healthcare, which it had agreed to do to help mitigate antitrust concerns under its proposed merger with Humana.

Aetna under the terms of their agreement will pay a $1 billion breakup fee to Humana. Humana previously said it would use the money for possible spending on acquisitions, share buybacks, and dividends. Humana in a release said it plans to issue an updated strategic plan and 2017 financial guidance for the company on Tuesday (Wilde Mathews, Wall Street Journal, 2/14; AP/Sacramento Bee, 2/14; Coombs, CNBC, 2/14; Japsen, Forbes, 2/14; Humer/Banerjee, Reuters, 2/14; Humana release, 2/14).

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