(In third to last paragraph, corects last name to Jackson, not
By Diane Bartz and Caroline Humer
Feb 8 A federal judge on Wednesday ruled against
U.S. health insurer Anthem Inc's proposed $54 billion
merger with smaller rival Cigna Corp, derailing an
unprecedented effort to consolidate the country's health
The U.S. Justice Department sued in July to stop Anthem's
purchase of Cigna, a deal that would have created the largest
U.S. health insurer by membership, and Aetna Inc's
planned $33 billion acquisition of Humana.
On Wednesday, Judge Amy Berman Jackson of U.S. District
Court for the District of Columbia issued the ruling against
Anthem's deal, saying that the merger would have worsened an
already highly concentrated market and was likely to raise
Last month, a different U.S. judge ruled against Aetna's
proposed deal for Humana.
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.
Jackson had separated the Justice Department's case into two
trials. Her ruling focused only on the first one in which the
Justice Department argued that the tie-up would hurt the ability
of large national employers to get competitive rates for the
health coverage they provide workers.
The second trial considered overlaps in the two insurers'
business selling health benefits to individuals, and
administering Medicare Advantage coverage to the elderly.
Anthem argued that there was enough competition because
large companies with more than 5,000 employees often used
multiple smaller players in the national market, but the judge
"Regional firms and new specialized 'niche' companies that
lack a national network are not viable options for the vast
majority of national accounts, and they will not ameliorate the
anticompetitive effects of this merger," Jackson wrote.
An Anthem spokeswoman and a Cigna spokesman both declined to
comment on the decision.
Acting Assistant Attorney General Brent Snyder of the
Justice Department's Antitrust Division said the ruling had
prevented American consumers from facing higher health insurance
premiums and less innovation.
Bill Baer, who was head of the Justice Department's
antitrust division when it decided to sue to block both the
insurance deals but has since left the agency, also hailed the
decision. "Together with the decision on Aetna and Humana, this
preserves five large national providers of critically important
health insurance products," he said.
The fifth player, UnitedHealth Group Inc. was not
involved in the deals.
Some Wall Street analysts expect all four of the companies
to now move on, although Aetna and Humana have not committed to
doing so. Their deal expires Feb. 15.
More deals may be in the offing, JPMorgan analyst Gary
Taylor said in a research note. "Given Anthem and Cigna's
pursuit of Humana in 2015, we think new potential combinations
could emerge." He does not expect shares in either Anthem or
Cigna to move given that investors had expected this ruling.
Cigna is entitled to receive from Anthem a $1.85 billion
break-up fee if the deal fails to win regulatory approval,
according to the merger agreement. The agreement also requires
Cigna to have put forth its best effort on that front.
But Anthem and Cigna disagreed about the deal in court,
Jackson wrote in her order, with Cigna refusing to sign off on
Anthem's interpretation of how the companies could garner
Anthem is the largest member of the Blue Cross Blue Shield
Association and operates BCBS plans in 14 states. It and said it
could apply its discounts to Cigna members while Cigna said its
collaborations with doctors would save money.
Pre-merger integration was stalled and incomplete, the judge
(Additional reporting by Akankshita Mukhopadhyay and Dipika
Jain in Bengaluru; Editing by Bernard Orr and Leslie Adler)