Aetna and Humana has decided to stop their $34 billion merger after the judge blocked the merger on Jan. 23 court ruling.As a result of the failed merger, Aetna has to pay $1 billion to Humana as the breakup fee.
Aetna announced on Tuesday, Feb. 12 to walk away from the merger with Humana as reported by Reuters. The court has also deterred another merger between two insurance companes Anthem and Cigna on Feb. 8.
Health insurance industries have been trying to consolidate their business after suffered to fulfill the Affordable Care Act requirements, which also called Obamacare. Insurance companies that joined the program have reported to lose money, and decided to cut back the offerings or withdraw from the Affordable Care Act completely. Humana has also declared to exit Obamacare this year after an annual lost last year.
Following the failed merger, Aetna will also end the agreement in Medicare Advantage plans to small insurer as reported by Forbes. Aetna has also committed to pay termination fees after ending the agreement. The amount of the fee is undisclosed.
Aetna chairman and CEO Mark Bertolini expresses his disappointment to end the merger which has been planned for 19 months. But he promises to move forward and developing a better strategy and suggesting Humana to do the same.
“We are disappointed to take this course of action,” Bertolini said. “But both companies need to move forward with their respective strategies.”
The two insurance companies have decided to merge in July 2015, followed by the merger between Anthem and Cigna. Subsequently, U.S. Department of Justice filed antitrust lawsuit to block the two deals.
Two federal judges of the Federal District Court for the District of Columbia ruled against the merger recently. Judge John Deacon Bates ruled against the merger between Aetna-Humana on Jan. 23. While two weeks later Judge Amy Berman Jackson ruled to block the merger of Anthem-Cigna.
Watch the report regarding Bertolini’s letter to Justice Department in August 2016. He said the company would quit Obamacare if the DOJ blocked its merger plan below:
