Anthem-Cigna Merger Denial Should Give Future Mega-Merger Proponents Pause


 

It didn’t take long for the other shoe to drop in government challenges to major health insurance mergers, with a federal trial court smacking down the proposed $48 billion purchase of Cigna Inc. by Anthem Inc.

Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia said the merger would disrupt competition in the market for “national accounts” and wouldn’t create any merger-specific efficiencies that could excuse that disruption.

Jackson’s decision comes only two weeks after her colleague on the court, Judge John D. Bates, stopped the proposed $37 billion merger of Aetna Inc. and Humana Inc. (See my prior story here.)

Many health-care and antitrust attorneys that I spoke to said the combined force of both decisions should frustrate other proposed mega-mergers in the health insurance industry. The parties to these two proposed mergers, Anthem, Cigna, Aetna and Humana are four of the five largest health insurers, along with the Minnesota-based UnitedHealth Group.

Aetna and Humana haven’t yet decided to appeal the court order blocking their merger, but Anthem immediately filed an appeal with the U.S. Court of Appeals for the District of Columbia Circuit. At the same time, Cigna seemed hesitant to commit to fighting for the merger.

And that sets up one of the more peculiar aspects of the Anthem-Cigna merger trial. As the insurers fought the Department of Justice in court, executives from Cigna already seemed to have soured on the deal.

“Cigna appears to have played the part of the kid in class who rolls his eyes every time the student in the front row speaks,” Douglas Ross, an antitrust and health-care attorney at Davis Wright Tremaine in Seattle, told me.

Unfortunately, Cigna and Anthem were supposed to be on the same debate team, and the judge noticed, and wasn’t impressed, by their discord,” he added.

David Balto, an antitrust attorney in Washington, warned that even if the appeals court were to reverse Jackson’s ruling and allow the deal to go through, the animosity between the two parties could be dangerous for the combined company. “A shotgun wedding like this won't pass muster with the courts,” he said.

Between a low probability that either highly fact-dependent trial court ruling would be reversed on appeal, and the strong possibility that the parties have had enough, these deals, at least, appear to be dead.

Read the full story on the reaction to the merger here.

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