A proposed $34 billion merger between health insurance giants Aetna and Humana has fallen apart, after a federal judge ruled last month that it violated antitrust laws.
Aetna announced on Tuesday that the two companies would not be appealing the ruling. District Judge John Bates had found that integration of the two firms would illegally stifle competition in the market for Medicare Advantage.
The CEO of Aetna, Mark Bertolini, said that “the current environment makes it too challenging to continue pursuing” the merger, by appealing Bates’ ruling. The announcement also came one week after a federal judge in Washington blocked a $54 billion merger between two other health insurance conglomerates, Anthem and Cigna.
The Justice Department had argued that the Aetna-Humana deal would eliminate choice for Medicare Advantage plans throughout 264 counties stretching across 21 states, according to Bloomberg. Bates sided with the Justice Department, saying evidence showed Medicare and Medicare Advantage are not considered substitutes by consumers.
Medicare Advantage is privately-administered health insurance, available to those eligible for Medicare—every American more than 65 years old. About 18 million people, or roughly 30 percent of Medicare recipients, opt for the supplement to the public health insurance program.
The Aetna-Humana merger became a political flash point last summer, after Aetna announced it would be withdrawing individual plans from Affordable Care Act exchanges in eleven different states. The development came as a blow to Democrats, just months before they suffered staggering defeats at the ballot box.
It was later revealed by The Huffington Post that Aetna had threatened to pull out of the Obamacare exchanges in retaliation for any Justice Department moves to stop the Humana merger.
“[I]f the deal were challenged and/or blocked we would need to take immediate actions to mitigate public exchange and ACA small group losses,” Bertolini told Justice Department officials in a letter. “Specifically, if the DOJ sues to enjoin the transaction, we will immediately take action to reduce our 2017 exchange footprint.”
Due to the merger’s failure, Aetna will pay Humana a $1 billion fee, per their preliminary agreement. The “kill fee” clause had been blasted by Democratic lawmakers after Aetna withdrew from Obamacare exchanges.
“[T]he inclusion of this $1 billion fee now appears to be an expensive and risky bet on a highly uncertain outcome,” said Sens. Elizabeth Warren (D-Mass.), Bernie Sanders (I-Vt.), Sherrod Brown (D-Ohio), Ed Markey (D-Mass.) and Bill Nelson (D-Fla.), in a Sept. 8, 2016 letter to Bertolini.
They accused Aetna executives of gambling on “an outcome with consequences that could limit competition in the marketplace and have a negative impact on consumer choice in the states affected by this change.”