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Two Major Health Insurance Company Mergers Blocked: Antitrust Laws and the Future Uncertainty of the Affordable Care Act to Blame

On February 14, 2017, Aetna and Humana, two major United States healthcare companies, called off their planned merger due to a federal court ruling that blocked the deal last month. ((Rebecca Hersher, Aetna And Humana Call Off Merger After Court Decision, NPR (Feb. 14, 2017), http://www.npr.org/sections/thetwo-way/2017/02/14/515167491/aetna-and-humana-call-off-merger-after-court-decision.)) Anthem and Cigna, two other major US healthcare companies, also called off their planned merger the same day. ((Aaron Smith & Jackie Wattles, Aetna-Humana & Anthem-Cigna: Two Mergers Die in One Day, CNN (Feb. 14, 2017), http://money.cnn.com/2017/02/14/investing/aetna-humana/.)) The Aetna-Humana deal was worth $34 billion and the Cigna-Anthem deal was worth $54 billion. ((Id.)) Both deals were blocked by federal judges because of antitrust concerns. ((Id.)) Aetna and Humana announced that they will not be appealing the judge’s decision. ((Anna Wilde Matthews, Aetna, Humana Abandon Merger, Putting Paths to Growth in Doubt, Wall Street Journal (Feb. 14, 2017), https://www.wsj.com/articles/aetna-humana-mutually-end-merger-agreement-1487074314.)) The termination of the planned Aetna-Humana merger was not a surprise; analysts had predicted the two would not appeal the decision. ((Carolyn Johnson, Cigna Demands Anthem pay $14.8 Billion in Lawsuit to Terminate Merger Agreement, Washington Post (Feb. 14, 2017), https://www.washingtonpost.com/news/wonk/wp/2017/02/14/aetna-and-humana-terminate-their-merger-agreement/?utm_term=.c180392cffb6.))

Multiple sources reported that allowing the mergers of these healthcare companies would hurt competition in the healthcare market. ((Hersher, supra note 1.)) It was predicted that if the mergers occurred prices would be higher for consumers and there would be fewer services for Medicare patients. ((Id.)) “U.S. District Judge John Bates found that to be the case, writing in his decision that, ‘the merger of Aetna and Humana would be likely to substantially lessen competition in markets for individual Medicare Advantage plans and health insurance sold on the public exchanges’ in 364 counties.” ((Id.)) While blocking the merger may be good for consumers because the price of health insurance will not increase as much, “Humana…announced it will exit all of the Affordable Care Act exchanges where it sells individual insurance plans in 2018.” ((Johnson, supra note 6.))

The future of the exchange business, where people without employer-based insurance can purchase health coverage, has become uncertain because the Trump administration would like to repeal the Affordable Care Act. ((Id.)) The Trump administration has not announced if and when a replacement for the Affordable Care Act would be put in place.  Humana will continue to serve its 150,000 customers insured on the exchanges through the end of 2017. ((Id.)) Other insurance companies have already left the exchange market because of unbalanced risk pools. Not enough healthy people were purchasing insurance on exchanges, leaving companies with a majority of sick customers. ((Id.)) If every healthcare company follows the current trend of leaving the exchange market, sick consumers without employer-based health insurance may not be able to buy insurance anywhere. If the Affordable Care Act is repealed, there could be hundreds of thousands of people without health insurance.

If the two mergers went through, the healthcare industry would be dominated by three insurers. ((Smith & Wattles, supra note 2.)) Even though there would be less competition in the market, Aetna and Humana believed that the merger would have been beneficial for consumers. ((Johnson, supra note 6.)) While it is hard to predict what the healthcare market will look like in a few months due to the uncertainty surrounding what the Trump administration will do with the Affordable Care Act, it would most likely not be good for consumers to only have three large healthcare providers to choose from. The antitrust concerns of the court could play out in the coming months if other mergers proceed later. There is a lot of uncertainty in the health insurance market right now and only time will tell what will happen to the market after the Affordable Care Act is repealed or modified.