Appeals court upholds decision to block Anthem bid for Cigna

Robyn Valdez
April 30, 2017

A federal judge ruled in February that the combined company would result in reduced competition in the national health insurance market, agreeing with the U.S. Department of Justice, which brought the antitrust case last July. He recommended the case be remanded back to the District Court to decide the merger's effect on hospitals and doctors.

Anthem was granted a temporary restraining order against Cigna shortly thereafter.

Bloomfield-based Cigna was a reluctant partner in the merger, and has a pending lawsuit in a DE chancery court to end its relationship with Anthem and seek a $1.85 billion breakup fee and another $13 billion in damages resulting from the merger effort.

Neither company immediately responded to a request for comment.

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Anthem's bid to complete the merger is likely over now. A DE judge has blocked Cigna from walking away from the deal pending the results of a May 8 hearing.

Michael Newshel, an analyst with Evercore ISI, called the possibility of reviving the deal slim.

In July a year ago, Anthem struck a friendly deal to acquire Cigna in a bid to create the largest health-insurance company in the US.

According to Anthem, the merger's efficiencies would benefit customers directly by reducing the costs of customer medical claims through lower provider rates, without harm to the providers. In September 2015, soon after the merger was proposed, the AMA released Competition in Health Insurance, an annual analysis of insurance markets that showed almost half of all states could see diminished competition in local health insurance markets if the Anthem-Cigna and Aetna-Humana mega-mergers were allowed to proceed. But the Justice Department said Anthem had no real plan to reach those savings.

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The majority also questioned Anthem's cost-savings assertion, stating it hadn't explained why such savings would occur. If not, Kavanaugh said, he'd have allowed the combination. U.S. Circuit Judge Patricia Millett, a 2013 selection by President Barack Obama, concurred with Rogers. Rogers was nominated by another Democrat, President Bill Clinton, in 1993.

Cigna has already sued Anthem over the apparent failure of the merger, seeking $1.85 billion in breakup fees plus $13 billion in damages.

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.

Both Anthem and Cigna are leaders in "national accounts", another name for large group policies.

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