A Doctor's Interpretation of the Failed Aetna-Humana Merger

February 17, 2017

Humana and Aetna's merger didn't work out - but the real story is how much Aetna was willing to pay to just back out of the agreement.

Over the last few days, two large insurance company mergers between Aetna and Humana, and Anthem and Cigna lost antitrust suits brought up by the Justice Department. The result of one these suits is that Aetna and Humana called off their $37 billion dollar merger with a payout of $1 billion from Aetna to Humana for backing out of the agreement. The other one is in legal entanglements with Anthem being sued by Cigna for a termination fee and breaches of the merger agreement.

I would assume that most physicians are pleased with the decisions in these cases and the ultimate failure of these mergers. However, there is more to this than just trying to keep a semblance of competition in the healthcare insurance marketplace.

To me, the $1 billion payout by Aetna is the key fact to take away from this fiasco. For a company to be able to lose $1 billion for just the opportunity to merge speaks volumes about the potential revenue that this merger would have produced for this combined entity. This payout also communicates the obscene pot of cash that Aetna must be sitting on to afford this astronomical sum of money without batting an eyelash.

The next time that you are negotiating a contract or have received a denial for a more expensive medication from Aetna, you might want to remind them that they gave a $1 billion payout for nothing more than the opportunity to dissolve a merger agreement with another insurance company.

Physicians are the other hand, actually provide desperately needed medical services to benefit real people. I wonder if that argument will get the insurance companies attention when reimbursements are slashed and patient services are denied. Any responsible person should certainly consider that a reasonable idea.