By  Sandra Fadel

Aetna’s announcement that it would acquire Humana for $37 billion wasn’t the only merger agreement to come out of July 2015; in fact, it wasn’t even the largest. That same month, insurance giants Anthem and Cigna also announced a $53 billion merger which would effectively consolidate the top five biggest players in the insurance industry into three, each with annual revenue of more than $100 billion. United Healthcare, the remaining independent company, would come in third.[1]

Aetna and Cigna spent more than $1.3 million on outside lobbying for the proposed mergers, but state senators, the Justice Department, and hospital and medical industry groups were skeptical.[2] In July 2016, the Justice Department, along with eight states and the District of Columbia, sued to stop the merger under section 7 of the Clayton Act.[3] The complaint alleged that a combined Aetna and Humana would substantially reduce competition for the sale of Medicare Advantage – a form of Medicare coverage provided by private insurers[4] –and health insurance to individuals through the public exchanges.[5]

The Court adopted a burden-shifting analysis to determine whether the government met its ultimate burden of proving, by a preponderance of the evidence, that the merger produced anticompetitive results.[6] Defendants Aetna and Humana argued that the Medicare Advantage product was not a “market” within the definition of the Clayton Act and asked the Court to look at the Medicare market as a whole.[7] The Court disagreed, holding that “the weight of the evidence [. . .] indicates industry [and] public recognition of a distinct market for Medicare Advantage”.[8] The Court also relied on analysis that showed that the merger would increase, by about 180, the number of counties where at least 75% of Medicare Advantage customers would be in the hands of a single insurer,[9] and that the concentration of competition in that market would rise above presumptively unlawful levels in 364 counties across 21 states.[10]

The Court made similar findings with respect to the merger’s impact on insurance plans bought on public exchanges. It concluded that the companies competed head-to-head in this market and found “persuasive evidence” that Aetna had withdrawn its participation in the state public exchanges “not for business reasons, but [. . .] to follow through on the threat that it made earlier”, specifically, to withdraw its participation in the Affordable Care Act if the Obama Administration opposed the merger.[11]

Under the terms of the merger agreement, Aetna owes Humana a $1 billion break-up fee and is contemplating all options available in addition to an appeal under the new Administration. This result may bode poorly for the planned Anthem-Cigna mega-merger which was challenged by the Justice Department and is awaiting a ruling.[12] The challenge to the merger was expected, especially given the high level of consolidation in the insurance industry at present. The Courts’ message seems clear: additional scrutiny will be used to review the functional effect of a merger, and divestments just won’t do it anymore. Shares of all four companies declined.[13]

Updates for the week of February 13th, 2017: On February 8th, 2017, Judge Amy Berman of the U.S. District Court for the District of Columbia struck down the Anthem-Cigna merger on grounds similar to those referenced in the Aetna-Humana merger.[14] Vowing to “work aggressively to complete the transaction”, Anthem filed a motion for expedited appeal, arguing it would be irreparably harmed unless the judgment of the lower court is overturned.[15] Cigna is not a party to the appeal, and has commenced its own suit against Anthem for a declaratory judgment that it had legally terminated the agreement. The suit seeks a $1.85 billion reverse termination fee under the deal as well as nearly $13 billion in damages for the loss to shareholders because of the failed merger process.[16]



[1] See Anna Wilde Mathews, Liz Hoffman, Dana Mattioli, With Merger Deal, Aetna, Humana Get Ahead of the Pack, Wall Street Journal, Jul. 6, 2015, at B1.

[2] Elizabeth Whitman, Cigna And Aetna Spent More Than $1. 3M On Outside Lobbying For Mergers In 2015, International Business Times (Jan. 11, 2016, 10:47 AM), (Eight states also joined in the suit. They are: Delaware, Florida, Georgia, Illinois, Iowa, Ohio, Pennsylvania and Virginia).

[3] 15 U.S.C. § 18 (1996) (The Clayton Act is fundamental in Antitrust litigation and prohibits corporate activities the effect of which would be to “substantially lessen competition” within an industry).

[4] As explained in the opinion, a Medicare Advantage Plan is a type of Medicare health plan offered by a private insurer paid by the government to provide health insurance to Medicare-eligible seniors. The Medicare Advantage program was intended to “[e]nrich the range of benefit choices available to enrollees” and to “increase[e] efficiency in the overall health care system” through competition and limited provider networks. This can be in a parenthetical for Footnote 6.

[5] Complaint par.19, United States v. Aetna Inc., No. 1:16-cv-01494 (D. D.C. 2016).

[6] United States v. Aetna Inc., No. 1:16-cv-01494, slip op. at 18, 19 (D. D.C. Jan. 23, 2017).

[7] Id. at 20, 37-43.

[8] Id. at 27.

[9] Mathews, Hoffman, Mattioli, supra note 1.

[10] No. 1:16-cv-01494, slip op. at 114.

[11] Id. at 127; see also, Shelby Livingston, Aetna jeopardized its antitrust case and the ACA by exiting some exchanges, Modern healthcare (Jan. 24, 2017), (explaining the impact of Aetna’s decision to withdraw from the ACA on the public perception and legitimacy of the public exchanges).

[12] Brief for Plaintiffs, United States v. Anthem, Inc. and Cigna Corp., No. 1:16-cv-01493 (D. D.C. 2016)(The Court will not be adopting an identical analysis in this case since Cigna does not operate in the Public Exchanges or Medicare. Instead, the Court will adopt a more traditional analysis by looking at the common insurance product of employer-sponsored plans).

[13] David McLaughlin, Zachary Tracer, Andrew M. Harris, Aetna’s $37 Billion Humana Takeover Blocked by Judge, (Jan. 23, 2017, 1:42 PM),

[14] Eric Koh, $54B Anthem-Cigna Merger Spiked By Judge, (Feb. 8, 2017, 7:15 PM),

[15] Kat Greene, Anthem Wants Rush In Appeal of Cigna Merger Loss, (Feb. 13, 2017, 11:16 PM),

[16] Melissa Lipman, Cigna Tries to Nix $54B Anthem Deal With $15B Damages Suit, (Feb. 14, 2017, 4:04 PM),

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