Antitrust rulings put chill on health insurance mergers

Antitrust rulings put chill on health insurance mergers

The planned merger between Aetna Inc.

The formal conclusion of the deal did not come as a surprise for most.

Aetna's decision comes weeks after a court ruled against the deal due to fears it would lower competition. Two would-be mergers of huge health insurance companies that would have changed the market by turning the Big Five health plans into the Big Three were called off today.

An analysis from the Center for American Progress, a progressive advocacy organization, found that Medicare users pay less when Aetna and Humana compete directly.

Aetna Chairman and CEO Mark Bertolini raised that possibility months ago.

"Medicare Advantage plans are privately run but reimbursed by Medicare".

The District Court said that the merger would decrease competition and lessen choice in the "national accounts" market. Molina will receive a $75 million breakup fee. The breakup fee will grow Humana's cash to the highest level in at least 20 years. The company recently posted a job listing for an M&A analyst, sparking speculation. Cigna intends to vigorously defend against the Anthem litigation and pursue its own action against Anthem for the damages that Anthem has caused Cigna and its shareholders.

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Hours later, Anthem said it would appeal the decision.

On Tuesday, it issued a statement saying it has exercised its right to terminate the proposed merger agreement, and the company, "believes that the transaction can not and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna's shareholders".

On the heels of Aetna's (AET - Free Report) and Humana's (HUM - Free Report) announcement, health insurance competitors Cigna (CI - Free Report) and Anthem (ANTM - Free Report) also announced that their merger deal is done-zo.

It was a rough day for the already-roiled USA health insurance market: One giant merger was abandoned, another is threatened by infighting, and a major insurer announced it will stop selling coverage on public exchanges in 11 states.

Health insurers Anthem and Cigna are now trading lawsuits instead of working together to salvage a shaky $48-billion buyout agreement.

U.S. District Judge John Bates said that Aetna lied about why it pulled out of Affordable Care Act exchanges in 11 states, noting that Aetna said it pulled out of the exchanges because it was too expensive.