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Federal Judge Blocks Aetna-Humana Merger

Aetna Inc.’s $37 billion deal to acquire Humana Inc. has been blocked by a federal judge. On January 23, Judge John D. Bates, a federal district court judge for the District of Columbia, ruled that the proposed merger violates anti-trust laws by reducing competition in the insurance market.

The Aetna-Humana transaction is one of two pending large carrier mergers that, if allowed, would continue to consolidate the U.S. health insurance landscape. The other involves Anthem Inc. and Cigna Inc. Both mergers are currently being challenged by the Department of Justice (DOJ) on anti-trust grounds.

The DOJ’s case against the merger centered on Medicare Advantage plans and maintained the merger would have eliminated, or at least significantly diminished, competition between the carriers in 364 counties in 21 states. This would have created an environment that could lead to higher Medicare Advantage premiums for the elderly. The DOJ also asserted that the merger would have reduced competition on the Affordable Care Act insurance exchanges.  Coincidentally, the exchange concern could be rendered moot by the current posture offered by the Trump Administration in regards to the Affordable Care Act as a whole.  Nonetheless, Judge Bates aligned his decision with the government’s positions.

Aetna has indicated it is considering whether to appeal the ruling. Industry experts believe an appeal is likely forthcoming since the terms of the merger reportedly call for Aetna to pay Humana a $1 billion break-up fee in the event the merger fails for any reason.

The decision could be a bad sign for the pending Anthem-Cigna merger, particularly since industry experts expected that, of the two proposed mergers, the deal between Aetna and Humana would have been received with less resistance.

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