Anthem-Cigna Merger Blocked in Federal Court

February 9, 2017

A federal judge recently ruled against US health insurer Anthem Inc’s proposed $48 billion merger with Cigna Corp, citing the merger’s potential to negatively impact competition on the insurance market.

“Anthem is significantly disappointed by the decision as combining Anthem and Cigna would positively impact the health and well-being of millions of Americans - saving them more than $2 billion in medical costs annually,” Joseph R Swedish, chairman, president, and CEO of Anthem, said in a press release.

Initially, the US Justice Department sued in July to stop Anthem’s acquisition of Cigna—the deal would have created the largest US health insurer by membership. The trial, which began in December, was split into two parts—the first part of the trial focused on competition in the national employer market and the second trial dealt with competition in 35 local markets.  ______________________________________________________________________________________________________________________
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During her ruling against the Anthem-Cigna merger, Judge Amy Berman Jackson of the US District Court for Washington DC, said the merger would have worsened an already highly concentrated market and likely raise prices.

In a 12-page order, Judge Jackson said the merger would eliminate head-to-head competition for the administrative services business of large employers and result in higher prices and reduced innovation in the market. Additionally, in the order, Judge Jackson disagreed with the claim that Anthem’s merger would deliver medical cost savings of more than $2 billion. According to Judge Jackson, the insurers did not show sufficient proof that they could not deliver those same savings as standalone companies. Judge Jackson also questioned both Anthem and Cigna’s ability to negotiate lower rates from health care providers.

“Anthem is asking the court to go beyond what any court has done before: to bless this merger because customers may end up paying less to health care providers for the services that the providers deliver even though the same customers are also likely to end up paying more for what the defendants sell,” she wrote in the order. 

Because Judge Jackson determined that competition would be harmed in the national market, Jackson did not rule on the question of competition in the local markets.

According to the merger agreement, Cigna is entitled to receive a $1.85 billion break-up fee from Anthem if the deal fails to win regulatory approval.

“Anthem has been a leader in providing individuals with access to high quality, affordable healthcare,”Mr Swedish concluded. “Our decision to acquire Cigna is grounded in our commitment to this goal and to leading our industry during this period of dynamic change. If not overturned, the consequences of the decision are far-reaching and will hurt American consumers by limiting their access to high quality affordable care, slowing the industry’s shift to value based care and improved outcomes for patients, and restricting innovation which is critical to meeting the evolving needs of healthcare consumers.”

Both Anthem and Cigna announced they will review the opinion and evaluate different options in accordance with the merger agreement. It is expected that Anthem will file a notice of appeal and request an expedited hearing of its appeal to reverse the Court’s decision so Anthem can move forward with the merger.

Julie Gould