A US district judge has blocked a $37 billion merger between Aetna (NYSE: AET) and Humana (NYSE: HUM), determining the agreed-upon transaction from July 2015 would substantially harm competition among health insurers. If the ruling stands, Aetna will be on the hook to pay Humana a $1 billion breakup fee. Judge John D. Bates was not convinced that the planned divesting of some assets to Molina Healthcare (NYSE: MOH) went far enough to satisfy antitrust concerns. In particular, he found the deal would likely lead to higher prices for seniors using Medicare Advantage, the federal insurance program offering plans with added services as well as prescription drug coverage.

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“In that market, which is the primary focus of this case, the merger is presumptively unlawful—a conclusion that is strongly supported by direct evidence of head-to head competition as well. The companies’ rebuttal arguments are not persuasive,” Bates concluded.

The US Department of Justice filed suit to challenge the deal last year, with the trial taking place last month, after 364 counties nationwide and a set of public exchanges in three Florida counties logged legal complaints. The court estimates that its decision will save customers and taxpayers up to $500 million per year. For their part, Aetna and Humana asserted that the merger would create a more cost-effective and efficient company—a win for consumers. But sending some 290,000 Medicare Advantage customers scattered across 21 states to Molina was not enough of a tradeoff to reduce net consolidation in the health insurance industry.

Although Aetna is considering appealing the decision, that process could prove costlier than even that stiff breakup fee. And, typically, merging companies tend not to undertake the likely lengthy litigation process with no certain outcome, as noted by The Wall Street Journal.

Anthem’s (NYSE: ANTM) $48 billion deal to acquire Cigna (NYSE: CI) could be next, with a ruling expected from the DOJ any day now.

Aetna shares fell 2.7% on the news to $119.20, while Humana closed up 2.2% to end the day trading at about $205. Molina’s shares also ended the day down 3.7%.

Article by Adam Putz, PitchBook