A potential $54 billion deal that would have merged major health insurers Anthem and Cigna, and which would have represented the largest health insurance transaction in the U.S., has been blocked by a federal judge.
The Feb. 8 ruling came from Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia who issued the ruling against Anthem's takeover of Cigna, according to Reuters. This decision comes just a few weeks after U.S. District Judge John D. Bates in Washington blocked the $37 billion Aetna-Humana merger. According to the Reuters report, “Government antitrust officials 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. Cigna is entitled to receive from Anthem a $1.85 billion break-up fee if the deal fails to win regulatory approval.”
When the Aetna-Humana deal was blocked last month, insiders expressed serious doubts at that time about the potential for the Anthem-Cigna merger to be cleared, which was considered the tougher of the two deals to pass. If the two mergers did clear, it would have signaled an extraordinary effort to consolidate the U.S. health insurance industry. In both cases, appeals are possible but would likely be unsuccessful, according to reports.
Last July, the U.S. Department of Justice (DOJ) announced that the department, along with attorneys general from multiple states, would file lawsuits to block Anthem’s proposed acquisition of Cigna and Aetna’s pending acquisition of Humana. The DOJ alleged at the time that the transactions would “increase concentration and harm competition across the country, reducing from five to three the number of large, national health insurers in the nation.”
According to the DOJ press release last summer, the suit against Anthem and Cigna alleges that their merger would substantially reduce competition for millions of consumers who receive commercial health insurance coverage from national employers throughout the United States; from large-group employers in at least 35 metropolitan areas, including New York, Los Angeles, San Francisco, Denver and Indianapolis; and from public exchanges created by the Affordable Care Act in St. Louis and Denver. The complaint also alleged that the elimination of Cigna threatens competition among commercial insurers for the purchase of healthcare services from hospitals, physicians and other healthcare providers. “The merger would eliminate substantial head-to-head competition in all these markets, and it would remove the independent competitive force of Cigna, which has been a leader in the industry’s transition to value-based care,” the DOJ stated.
In response, Cigna officials expressed doubt regarding its desire to continue towards a deal with Anthem, stating, “In light of the DOJ's decision, we do not believe the transaction will close in 2016 and the earliest it could close is 2017, if at all.”
According to a Feb. 8 Politico report, “Anthem had argued that the merger would create $3 billion in savings that would largely be passed on to customers through lower rates. The company also pointed to emerging competitors, including private insurance exchanges, as evidence that there would continue to be vigorous competition for national accounts.”
Nonetheless, those arguments eventually lost with Wednesday’s ruling. Neither Anthem nor Cigna officials have released statements at this time. Healthcare Informatics will continue to update this story as it develops.