- On Monday, Judge John B. Bates of the U.S. District Court for the District of Columbia blocked the proposed $37 billion merger between insurance giants Aetna and Humana over antitrust concerns.
- In his ruling, the judge stated the insurers "proffered efficiencies do not offset the anticompetitive effects of the merger." The deal would "substantially lessen" competition in the Medicare Advantage market and public exchanges, the judge concluded.
- An Aetna spokesperson told the Wall Street Journal they are reviewing the ruling and are "giving serious consideration to an appeal."
The ruling to block the merger does not come as a major surprise. Several news sources previously reported that the mega-merger faced an "uphill battle" in convincing antitrust regulators that consumers wouldn't be harmed by the deal and would in fact benefit from it.
The deal was first challenged in a lawsuit from the U.S. Department of Justice last year, with the agency arguing that the proposed merger would negatively affect the competitiveness of markets for Medicare Advantage plans as well as ACA exchanges. Humana is the second-largest Medicare Advantage insurer, while Aetna is the fourth biggest.
"The government identified 364 counties across 21 states where it argues that concentration in the Medicare Advantage market would rise above the presumptively unlawful level if the merger proceeds, and 17 counties across 3 states where that would be true in the public exchange markets," the judge wrote in the ruling.
Representatives for both Aetna and the federal government had been exchanging barbs for the past several months. Aetna scaled back its ACA participation last year — a move that several Democratic senators said was motivated by the DOJ’s challenge of its pending merger. Aetna claimed that these accusations were unfounded and the deal would be a pro-competitive move that would benefit millions.
The American Medical Association, one of the many organizations that opposed the deal, was quick to show its support for the court’s ruling. “The court’s ruling sets a notable legal precedent by recognizing Medicare Advantage as a separate and distinct market that does not compete with traditional Medicare,” President Andrew W. Gurman said in a statement.
While the ruling would kill the merger, Aetna and Humana could appeal the decision. If appealed, the case would go to the U.S. Court of Appeals for the D.C. Circuit (though there is a slim chance of winning on the insurers' side if they go that route given how definitive the ruling was).
Aetna stock, which opened at $122.45 per share on Monday, dropped when the news first hit. Aetna's common stock closed at $119.28 per share on Monday. On Tuesday, it has taken further hits and sunk to $116.83 on Tuesday morning. Humana's stock, which opened at $200.89 per share on Monday, dropped initially after the news hit, but bounced to close at $205.15 per stock by close of business.
The Aetna-Humana deal is not the only mega-merger between insurers that's currently under scrutiny: The proposed $54 billion merger between Anthem and Cigna also faces suit from the Department of Justice over antitrust concerns. The court’s decision on Monday could spell bad news for the Anthem-Cigna merger, but Anthem recently indicated it would extend its contractual deadline for the merger to April 30 and Cigna suggested it "intends to evaluate its options." Anthem's and Cigna's stocks also dropped on news of the Aetna-Humana deal being blocked, but have since come back up somewhat at the time of this writing.