Published: Wed, February 15, 2017
Money | By Oscar Reynolds

Cigna Terminates Merger Deal With Anthem, Sues Insurer For $13 Billion

Cigna Terminates Merger Deal With Anthem, Sues Insurer For $13 Billion

Under the deal's terms, Aetna now owes Humana a $1 billion payment in what's known as a breakup fee.

It didn't take long for the other shoe to drop in government challenges to major health insurance mergers, with a federal trial court smacking down the proposed $48 billion purchase of Cigna Anthem Inc. U.S. District Judge John Bates said in an opinion filed Monday, Jan. 23, 2017, that he largely agrees with federal regulators who contended that such a combination would hurt competition.

David Balto, an antitrust attorney in Washington, warned that even if the appeals court were to reverse Jackson's ruling and allow the deal to go through, the animosity between the two parties could be risky for the combined company.

Cigna or Anthem may bid for Humana, Ana Gupte, an analyst at Leerink Partners, told Bloomberg.

Aetna is based in Hartford, Connecticut.

The deal's demise also ends a related agreement to sell certain Medicare Advantage plans to insurer Molina Healthcare. Anthem has said it will appeal but Cigna on Tuesday said it "believes that the transaction can not and will not achieve regulatory approval and that terminating the agreement is in the best interest of Cigna's shareholders".

Insurers have also said that combining would help them stabilize their business on the Affordable Care Act's public insurance exchanges.

Aetna, which had issued debt to acquire Humana, said it was redeeming the notes for cash.

Anthem last week filed an appeal of the court's ruling, but expectations for winning are seen as scant.

But the American Medical Association said last week, after the Anthem-Cigna deal was shot down, that a merger would have created a health care behemoth too large to regulate and with too much control over the lives of consumers. A federal judge blocked the deal in January 2017 on antitrust grounds, siding with the Justice Department.

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