Aetna, Humana walk away from merger; Cigna seeks to end Anthem deal

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By Caroline Humer

<span class="articleLocation”>Health insurers Aetna Inc and Humana Inc walked away from their $34 billion merger on Tuesday and
Cigna Corp sought to end its deal with Anthem,
shelving the industry consolidation they charted to address
former President Barack Obama’s Affordable Care Act.

Humana also said in a that it would exit the Obamacare
individual insurance market after this year, saying that its
membership for 2017 was showing signs of an overly expensive
group. It was already among insurers that had sharply cut back
new members in 2017 after losing money in 2016.

President Donald Trump and Republicans have vowed to repeal
and replace Obamacare, the national healthcare reform law that
created new individual insurance and expanded Medicaid, adding
20 million people to the ranks of the insured.

The insurers, in seeking their mergers, had said the
combinations would help them grow after adjusting to changes
related to the law in everything from how doctors and hospitals
are paid to the benefits insurers must provide.

The Aetna-Humana and Cigna-Anthem deals were announced in
July 2015, and the Justice Department filed a lawsuit a year
later saying they were illegal under antitrust law. Federal
judges hearing the cases ruled against Aetna’s acquisition of
Humana on Jan. 23 and Anthem’s $54 billion bid for Cigna on Feb.
8.

Government antitrust officials had argued that both deals
would lead to less competition and higher prices for Americans.
The acquisitions would have reduced the number of large national
U.S. insurers from five to three.

After the defeat in court, Aetna and Humana initially said
they were weighing an appeal. But they opted on Tuesday to scrap
the proposed merger, sending Aetna shares up 3.2 percent to
$126.06, while Humana fell 0.3 percent to $206.16.

Aetna will pay Humana a $1 billion breakup fee, or $630
million after taxes, and terminated its plan to sell some
Medicare Advantage assets to Molina Healthcare Inc, the
companies said.

Humana said its 2017 initiatives as an independent company
would include at least $2 billion in share buybacks and net
profit of $16.65 to $16.85 per share due in part to the $630
million after-tax payment from Aetna.

Humana is the first insurer to withdraw from the Obamacare
exchanges for 2017, but Aetna and Anthem have both said they
were waiting to see if lawmakers and the administration would
make changes.

CIGNA GOES TO COURT

Cigna said on Tuesday that it had notified Anthem that it
had terminated its merger and informed it that Anthem was
required to pay a $1.85 billion breakup fee.

It also said in a press release that it had filed a lawsuit
in Delaware to ask a judge to declare legal its decision to
terminate the deal. The company is also seeking $13 billion in
damages to shareholders who did not receive the takeover premium
because of the failed deal.

Anthem responded that the merger agreement was in place
until April 30, 2017, and that Cigna could not back out.
Anthem’s share price dipped less than 1 percent to $163.26 while
Cigna was up less than 1 percent at $145.97.



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