FILE – This Aug 4, 2011 file photo shows the Cigna logo at the headquarters of the health insurer Cigna Corp., in Philadelphia. Cigna said Tuesday, Feb. 14, 2017, that it is rejecting Anthem’s proposed $48 billion acquisition bid and suing the Blue Cross-Blue Shield insurer. The announcement comes hours after another major insurer, Aetna, said it was abandoning its planned $34 billion purchase of Medicare Advantage provider Humana. (AP Photo/Matt Rourke, File)Valentine’s Day proved to be a rough day for mergers in the already-roiled U.S. health insurance market: One giant merger was abandoned and another is threatened by infighting.
Both merger deals had already been rejected by federal regulators and judges, but the companies were considering appeals to those decisions. Now they both appear to be off.
Aetna said it was abandoning its planned $34 billion purchase of Medicare Advantage provider Humana early Tuesday. Then, later in the day, Cigna said it is suing Anthem to kill a $48 billion acquisition bid.
In suing to end its tie-up, Cigna, based in Bloomfield, Conn., said it wants more than $13 billion in damages from its onetime-companion Anthem, the Blue Cross-Blue Shield insurer, which is based in Indianapolis.
Cigna said it is seeking a $1.85 billion termination fee from Anthem and billions more in damages for what it says were Anthem’s breaches of the merger agreement.
The insurer said the damages include the amount Cigna shareholders would have received if the merger had not failed. It noted that Anthem assumed full responsibility for litigation strategy and getting the necessary regulatory approvals, suggesting it was Anthem’s responsibility to push the deal through.
“Cigna fulfilled all of its contractual obligations and fully cooperated with Anthem throughout the approval process,” the insurer said in a statement.
An Anthem spokeswoman said Cigna has no right to end the deal, and it remains committed to closing the transaction. The insurer had just filed on Monday paperwork to appeal the federal court ruling.
Anthem and Aetna put their acquisition bids together in 2015 and touted them as a way to grow enrollment and reap savings they would then pass on to consumers.
The deal would have given Aetna the opportunity to significantly expand its presence in Medicare Advantage coverage, which involves privately run versions of the federal Medicare program for people who are over 65 or disabled.
But the Department of Justice had sued last summer to stop the deals, due to concerns about how they may affect prices and consumer choices. Federal judges then rejected the acquisitions in separate rulings filed earlier this year.
The deals would have combined four of the nations’ five largest insurers. UnitedHealth Group is the largest.
The deals were conceived as a way to help the insurers increase their enrollment and cut down on expenses in part so they could improve their performances on the Affordable Care Act’s public insurance exchanges. Big insurers have been hit with substantial losses from the exchanges, even though they represent a relatively small part of their overall business. Many have already cut back their offerings, and that has slashed customer choices in markets around the country.
The collapse of one deal and the uncertain future of the other could hurt shoppers on the exchanges next year by leaving them with even fewer options and potentially higher prices. Morningstar insurance analyst Vishnu Lekraj said it’s possible all the four insurers involved in the deals could leave the individual health care exchanges created under Obamacare.
Aetna Chairman and CEO Mark Bertolini raised that possibility months ago. He said that if his company’s planned, was blocked, “we believe it is very likely that we would need to leave the public exchange business entirely,” according to court documents filed in that case.
Aetna, based in Hartford, Connecticut, says it lost $450 million last year on ACA-compliant coverage, while the company booked an overall profit of $2.27 billion. Its loss on ACA-compliant business was $100 million more than it expected.
Bertolini said recently that his company would announce by April 1 whether it will remain in any of its exchanges. “We’re looking at everything,” he said.
Government and industry officials have said President Donald Trump’s administration and congressional Republicans are weighing measures to stabilize the wobbly exchanges. Insurers have been pushing them to act soon.
“The clock is definitely ticking for the Trump administration to provide some clarity around what the rules will be,” Levitt said.