A federal judge has blocked Anthem’s acquisition of Cigna, making it the second of two major health insurer mergers that have been struck down by the courts this year.
In January, Judge John Bates ruled against Aetna’s deal to purchase Humana, saying the deal would lessen competition in the Medicare Advantage and individual exchange markets. The Justice Department and several states sued to block both the Anthem-Cigna and Aetna-Humana deals in July, citing antitrust concerns.
In her order enjoining the Anthem-Cigna merger, District Judge Amy Berman Jackson said the plaintiffs adequately demonstrated that the deal “is likely to have a substantial effect on competition” in the sale of health insurance to national accounts, or employer customers with more than 5,000 employees, in the 14 states where Anthem operates as the Blue Cross Blue Shield licensee.
The evidence showed that national accounts are distinct markets, the order noted, and witnesses agreed that there are only four national carriers that have the broad provider networks and account management capabilities required to serve national accounts.
Thus, the merger would unlawfully reduce competition in that already highly concentrated market, Berman ruled. “The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects: it will eliminate the two firms’ vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market,” she wrote.
Given that the merger was found to be anticompetitive in those markets, Jackson writes, she did not need to rule on whether the combination will also constrict competition in other markets, such as the sale of health insurance to “large group” employers of more than 100 employees in 35 separate local regions within the Anthem states.
In late January, Anthem filed a document with the Securities and Exchange Commission saying it has elected to extend the merger’s termination date to April 30. But in an SEC filing of its own last week, Cigna said it “has made no determination with respect to Anthem's notice seeking to extend the termination date, including whether Cigna will seek to terminate the merger agreement, and has informed Anthem that it is reserving all of its rights in this regard.”
The tie-up between the two major insurers has been troubled from the start, and testimony during the antitrust trial challenging the deal shed further light on the rift between the companies’ top executives.