In House - The FindLaw Corporate Counsel Blog

After Anthem-Cigna Merger Blocked, What's Next for the Health Care Insurance Titans?

The writing had been on the wall for health care insurers for some time.

Citing anti-trust violations, a federal judge had blocked Aetna's plan to merge with Humana last month. Anthem had to see it coming for its deal with Cigna this week.

U.S. District Court Judge Amy Berman Jackson blocked Anthem's planned merger for similar reasons -- the companies are just too big for the competition. Together, the rulings snuffed out nearly $100 billion in deals between the health-care insurance companies.

As stocks rose and fell on the news, lawyers scrambled to put the pieces together. But it's not likely anyone can put them back together again. There is one thing for sure, however. The attorneys will be talking about whether Anthem and Aetna owe Humana and Cigna almost $3 billion in termination fees.

Death and Termination Fees

After the ruling killed the Cigna deal, Anthem officials said they would "continue to work aggressively to complete the transaction" and would file an appeal. Cigna, in a statement, didn't sound so sure.

"Cigna intends to carefully review the opinion and evaluate its options in accordance with the merger agreement," the company said.

The Cigna merger agreement provides that in the event the merger does not go through, Anthem "may be required to pay" a termination fee of $1.85 billion. The Humana merger agreement provided Aetna would pay "a termination fee of $1 billion" upon certain conditions.

End From the Beginning

The parties negotiated the termination fees years before the judges stopped the proposed mergers. The acquiring companies wanted to pay less if they failed; their targets wanted more. As the mergers dragged out, including the legal challenges from the government, contract conditions have been playing out.

The companies will likely be weighing their obligations to appeal and other options. In any case, the termination agreements leave some room for interpretation. An underwriting association reports that Anthem and Aetna may be off the hook if certain conditions materialize.

"Both deal agreements include provisions stating that the acquiring company need not pay an antitrust-related termination fee if the acquisition target has committed a willful breach of the agreement terms, including breach of requirements that they try to comply with deal regulatory requirements," according to HealthLifePro.

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