Consumers Should Not Be On the Hook for Merger Breakup Fees

The Anthem-Cigna and Aetna-Humana mergers are worth an immense amount of money. Aetna’s attempt to purchase Humana is valued at $37 billion, and Anthem’s proposed acquisition of Cigna is valued at $53 billion. Yet relatively little attention has been paid to another aspect of the mergers—the breakup fees that the companies must pay if the deals are scuttled, and how they will impact consumers. Anthem and Aetna are required to pay large breakup fees if the mergers are blocked by state and federal regulators.

Both companies agreed to pay substantial sums of money if the deals fail to go through. Aetna would owe Humana $1 billion according to its filing. Anthem would have to pay Cigna $1.85 billion, according to the merger agreement. It is no wonder that the companies want these mergers approved, and that they are considering fighting DOJ’s lawsuit.

How will the companies pay these fees? There are few or no regulations governing this area, so Anthem and Aetna have a variety of options. One possible scenario is that they will pass the costs on to consumers, in order not to harm their profits. That approach would likely lead to an increase in insurance premiums, meaning consumers would pay the price. This would be most unjust; Anthem and Aetna sought to gain approval for anticompetitive mergers, attempted to covertly get the mergers approved by state regulators, spent enormous sums to influence antitrust authorities, and failed to provide evidence of how the mergers would benefit consumers. The insurers should be responsible for the failure of the mergers since they announced, promoted, and lobbied for them. Ordinary consumers should not have their premiums increase because Anthem and Aetna failed to get anticompetitve deals approved.

Consumers should not have to bear the costs of these breakup fees. And when Cigna and Humana receive the fees, they should use them to improve their services instead of buying up other insurance companies themselves.