Aetna's $37-billion Humana takeover blocked by US judge

Aetna $37-billion deal to buy rival insurer Humana was blocked by a federal judge, thwarting one of two large mergers that would reshape the US health-care landscape. Aetna said it was considering an appeal.

The transaction would violate antitrust laws by reducing competition among insurers, US District Judge John D Bates in Washington ruled on Monday. Under the terms of the merger agreement, Aetna owes Humana a $1-billion breakup fee.

The ruling is a victory for antitrust enforcement efforts initiated by the Obama administration. It may bode poorly for the planned $48-billion merger between Anthem and Cigna, which was challenged by the Justice Department and is awaiting a ruling. Shares of all four companies declined.

“If the judge blocked this deal, there is very little, if any, chance that the Anthem-Cigna deal gets cleared,” Jason McGorman, a Bloomberg Intelligence analyst, said by e-mail. Aetna lost 2.3 per cent to $119.75 at 12:56 pm in New York. Humana fell less than 1 percent to $200.05. Molina Healthcare, which planned to acquire assets divested by Aetna and Humana, slumped 2.9 per cent. Anthem fell 1 per cent, while Cigna lost 0.5 per cent.

The government case against the Humana takeover focused on the market for private health plans for the elderly, known as Medicare Advantage. The US argued that the combination of Aetna and Humana would eliminate competition between the insurers in 364 counties in 21 states and probably would drive up seniors’ premiums for Medicare Advantage plans.

Aetna countered that the Medicare market is much larger than the Justice Department claims because it includes both Medicare Advantage plans and government-administered Medicare, providing more choice for seniors than the government portrayed. The insurers also offered to sell assets to Molina Healthcare to guard against any risk to competition.