Antitrust rulings put chill on health insurance mergers

Brittany BishopFeb 16, 2017

Cigna sued Anthem in DE court Tuesday for $15 billion in damages and termination fees as it seeks to pull the plug on the companies' planned $54 billion merger - but Anthem said its fellow health insurer couldn't legally drop the deal. Cigna also filed a complaint against Anthem, seeking a $1.85 billion termination fee and additional damages of approximately $13 billion or more.

Aetna Inc says that it will be paying the $1 billion termination fee, $630 million after tax, to Humana Inc for the merger fail.

This afternoon Cigna said it was ending its $48 billion merger agreement with Anthem, according to the Wall Street Journal.

First the death of the $34 billion Aetna and Humana deal was announced. "('Anthem"), Cigna Corporation ('Cigna") and the combined businesses of Anthem and Cigna that is meant to be covered by the safe harbor for "forward-looking statements" provided by the Private Securities Litigation Reform Act of 1995.

Anthem's lawsuit, which was also filed in DE, seeks a temporary restraining order to prevent Cigna from ending the deal, arguing there is still enough time to complete the transaction first announced in July 2015.

Humana also said Tuesday it was pulling out of Obamacare for 2018. It added: "Cigna has determined that there is no feasible path to ever completing the merger, let alone by April 30, 2017". The decision was taken following a "no" from the federal court with respect to their deals.

U.S. District Judge Amy Berman Jackson ruled in favor of the DoJ last week, finding that "the proposed combination is likely to have a substantial effect on competition in what is already a highly concentrated market".

Anthem also said Cigna's CEO attacked the combined company's ability to achieve savings on medical costs during trial testimony.

Had they gone ahead, the insurance industry would have been dominated by three giants, as opposed to five companies.

Humana also announced that 2017 would be the past year in which the company will offer individual commercial medical coverage, and it will service members in the 11 states where it is now active.

It all started back in July 2015 when Anthem announced its intention to buy Cigna for $54 billion. Aetna shares rose 3 percent to $125.81, while Humana fell 0.4 percent to $205.97. As a result, Cigna has filed a almost $15 billion lawsuit against Anthem.

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