Anthem loses appeal of antitrust ruling against proposed Cigna merger

Gavel and flag in courtroom
In a 2-1 decision issued Friday, a panel of appeals court judges upheld Judge Amy Berman Jackson’s decision to enjoin the $54 billion proposed merger between Anthem and Cigna. (Getty/AlexStar)

A federal appeals court has denied Anthem’s attempt to challenge a judge’s ruling that its proposed acquisition of Cigna violates antitrust law.

In a 2-1 decision issued Friday, a panel of judges upheld Judge Amy Berman Jackson’s decision to enjoin the $54 billion merger. In their written opinion, the panel said Anthem failed to demonstrate that the deal could achieve the “extraordinary efficiencies” necessary to offset the effect of losing Cigna as a competitor in the already highly concentrated markets where it sells employer-based plans to national accounts.

RELATED: Anthem faces tough questions from appeals court judges

For one, Anthem had argued that the merger would benefit customers directly by reducing the costs of customer medical claims through lower provider rates, without harm to the providers. However, that argument fails to recognize that lower prices may be tied to a decrease in product quality, the opinion noted.

“Everyone would agree that rock-bottom provider rates seem beneficial to consumers, but when those rock-bottom prices lead to inferior medical services, any benefit to the consumers’ wallets is diminished by the harm to their health,” it states.

The court’s decision was welcome news for the American Medical Association, which had publicly opposed the merger and warned the Justice Department not to settle the case.

“The appellate court sent a clear message to the health insurance industry: a merger that smothers competition and choice, raises premiums and reduces quality and innovation is inherently harmful to patients and physicians,” AMA President Andrew W. Gurman, M.D., wrote in an emailed statement.

Attorney David Balto, who helped author an amicus brief on behalf of various consumer groups arguing that the lower court’s opinion should be upheld, was also pleased by the ruling. "This is a red-letter day for consumers," he said, noting that in this case, the court was particularly concerned by the deal's potential to harm healthcare delivery.

Balto predicted that Anthem would continue its bid to overturn the ruling, but said there isn't any reason to believe that effort will succeed since the insurer has failed so far to convince the courts of the merger's merits.

Anthem had pursued its appeal despite engaging in a public dispute with Cigna, which sued its would-be acquirer seeking to exit their merger contract. In fact, Anthem recently filed a preliminary injunction to block Cigna from terminating their merger agreement.

The other major health insurer merger, between Aetna and Humana, is off the table after the companies terminated their contract following a federal judge’s decision to block the deal.

It’s currently unclear whether Anthem and Cigna will also decide to abandon their deal. An attempt to reach Anthem for comment was unsuccessful as of press time.

Editor's note: This article has been updated to add comments from attorney David Balto.