According to a Modern Healthcare report, the $37 billion merger — which cost Aetna $1 billion as a breakup fee paid to Humana — was expensive on plenty of other fronts, including millions in legal and financial fees. The deal was expected to pressure Aetna's bottom line lower, but despite all the outlay — and additional losses from the company's exchanges under the Affordable Care Act — the Q1 results still beat Wall Street's financial estimates at $737 million.
Aetna had also paid $52.5 million as a breakup fee to Medicaid managed-care insurer Molina Healthcare; Molina had agreed to purchase divested Medicare Advantage assets from Aetna and Humana to satisfy Justice Department concerns.
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Altogether, according to Aetna's chief financial officer Shawn Guertin, the deal-that-wasn't cost the company approximately $1.2 billion in termination fees; Guertin gave investors the news on a Tuesday conference call.
Aetna also lost money on ACA exchanges, thanks to lower enrollments. The company had pulled out of 11 state exchanges in 2017, and has said that it is considering bailing from more of them this year. Although it was only a presence in four states at the beginning of the year, last month Aetna announced that it will be pulling out of the Iowa exchange for 2018, leaving only Virginia, Delaware and Nebraska. Last month it also filed preliminary paperwork to withdraw from Virginia, but that's not yet set in stone, according to a report in The Hill.
Humana, for its part, has already announced that it's leaving the individual market altogether next year.
Aetna has already taken heat for threatening to exit several profitable ACA markets as a means of pressuring antitrust regulators at the Department of Justice into approving the Humana merger. Regulators didn't budge, however; the merger was rejected, and Aetna carried out its threat by leaving the exchanges.
In the report, Guertin was quoted saying on the conference call, "Looking beyond 2017, we continue to evaluate our footprint with a view to significantly reduce our exposure to individual commercial products in 2018." Guertin added that the company intends to communicate further participation decisions "when appropriate."
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