By Caroline Humer
(Reuters) - Health insurers Aetna Inc and Humana Inc walked away from their $34 billion merger on Tuesday and Cigna Corp sought to end its deal with Anthem , shelving the industry consolidation they charted to address former President Barack Obama's Affordable Care Act.
Humana also said in a that it would exit the Obamacare individual insurance market after this year, saying that its membership for 2017 was showing signs of an overly expensive group. It was already among insurers that had sharply cut back new members in 2017 after losing money in 2016.
President Donald Trump and Republicans have vowed to repeal and replace Obamacare, the national healthcare reform law that created new individual insurance and expanded Medicaid, adding 20 million people to the ranks of the insured.
The insurers, in seeking their mergers, had said the combinations would help them grow after adjusting to changes related to the law in everything from how doctors and hospitals are paid to the benefits insurers must provide.
The Aetna-Humana and Cigna-Anthem deals were announced in July 2015, and the Justice Department filed a lawsuit a year later saying they were illegal under antitrust law. Federal judges hearing the cases ruled against Aetna's acquisition of Humana on Jan. 23 and Anthem's $54 billion bid for Cigna on Feb. 8.
Government antitrust officials had argued that both deals would lead to less competition and higher prices for Americans. The acquisitions would have reduced the number of large national U.S. insurers from five to three.
After the defeat in court, Aetna and Humana initially said they were weighing an appeal. But they opted on Tuesday to scrap the proposed merger, sending Aetna shares up 3.2 percent to $126.06, while Humana fell 0.3 percent to $206.16.
Aetna will pay Humana a $1 billion breakup fee, or $630 million after taxes, and terminated its plan to sell some Medicare Advantage assets to Molina Healthcare Inc , the companies said.
Humana said its 2017 initiatives as an independent company would include at least $2 billion in share buybacks and net profit of $16.65 to $16.85 per share due in part to the $630 million after-tax payment from Aetna.
Humana is the first insurer to withdraw from the Obamacare exchanges for 2017, but Aetna and Anthem have both said they were waiting to see if lawmakers and the administration would make changes.
CIGNA GOES TO COURT
Cigna said on Tuesday that it had notified Anthem that it had terminated its merger and informed it that Anthem was required to pay a $1.85 billion breakup fee.
It also said in a press release that it had filed a lawsuit in Delaware to ask a judge to declare legal its decision to terminate the deal. The company is also seeking $13 billion in damages to shareholders who did not receive the takeover premium because of the failed deal.
Anthem responded that the merger agreement was in place until April 30, 2017, and that Cigna could not back out. Anthem's share price dipped less than 1 percent to $163.26 while Cigna was up less than 1 percent at $145.97.
(Reporting by Caroline Humer in New York, Diane Bartz in Washington and Ankur Banerjee in Bengaluru; editing by Jeffrey Benkoe and Dan Grebler)