Merger Update

As The Department of Justice (DOJ) recently filed Antitrust lawsuits against both the Connecticut-based Aetna and Indianapolis-based Anthem “Mega-Mergers,” the DOJ is suggests a February start date to the trial. With Aetna aiming to complete a $37 billion acquisition of Humana and Anthem proposes an even larger $53 billion purchase of Cigna; federal prosecutors suggest they’ll need at least 200 days to prepare their case. Though the insurers are advocating for sooner trials, the DOJ contends the complexity of these cases requires significant time.

 
The Medicare Advantage (MA) competition between Aetna, the fourth-largest MA provider and Humana, the second-largest Medicare provider with 3.1 million beneficiaries, largely benefits Medicare recipients in over 600 counties in which both providers serve. In this case, Aetna and Humana would enjoy roughly 25% of the national MA market, according to Bloomberg.

 
The Anthem combination with Cigna would considerably impact self-insured employers who opt to receive administrative services from these companies. This revenue alone would constitute 66% of the newly combine conglomerate’s revenue and roughly 29% of the market, also according to Bloomberg.

 
At this point, Judge John Bates is continually contending that he cannot and will not hear both cases by the end of the year, despite urges from the defendants. Continually reported “contentiousness,” as both deals’ termination dates may pass before the ruling is complete. Humana can walk away from Aetna’s proposal on December 31st earning a $1 billion break-up fee, with Cigna potentially receiving $1.8 billion if Anthem cannot complete the merger by April 30, 2017. Regardless of lobbying efforts on behalf of these carriers’, this lawsuit will likely extend over a significant period of time, as it should considering the potential impact.