A federal judge sided with the Justice Department in ruling to block Anthem Inc.’s proposed $54 billion acquisition of rival health insurer Cigna Corp., handing the government its second victory against merging health insurers in a month.
U.S. District Judge Amy Berman Jackson in a 12-page order released late Wednesday said the merger, which would create the nation's largest health insurer, would substantially lessen competition in the “market for the sale of commercial health insurance to national account customers.” Anthem said it plans to appeal the decision, which if it stands would force the companies to scrap the deal.
The crux of the government’s argument relied on the effect the deal would have on big businesses that buy health insurance to offer to their employees in offices around the country. The government said the merger would reduce options for those U.S. business customers that can now typically only choose between four health insurers.
Anthem and Cigna denied that point, arguing health insurance is not a national but a local product and each market has multiple competitors.
Jackson disagreed with the companies, writing “defendants insist that customers face an array of alternatives” but evidence suggests regional health insurers that “lack a national network are not viable options for the vast majority” of large businesses that provide health insurance to their employees.
“Witness after witness agreed that there are only four national carriers offering the broad medical provider networks and account management capabilities needed to serve a typical national account,” Jackson wrote.
It is the Justice Department's second high-profile victory against merging health insurers in less than a month, after the U.S. District Court for the District of Columbia ruled Jan. 23 that Aetna Inc.’s proposed merger with Humana Inc. also would harm competition.
The Justice Department issued a written statement calling the decision a “victory for American consumers” and thanking the 11 states and the District of Columbia who joined the suit.
“This merger would have stifled competition, harming consumers by increasing health insurance prices and slowing innovation aimed at lowering the costs of health care,” said Brent Snyder, the interim head of the antitrust division.
The victory in federal court comes as a boon to the former Obama administration and Democrats, who have been critical of health insurance mergers. Under the guidance of former Attorney General Loretta Lynch, the Justice Department brought suit and successfully proved its case at trial, which was held from November through early January.
Connecticut Democratic Sen. Richard Blumenthal, one of the merger's fiercest critics, said the judge's decision will aid consumer choice and competition.
“Mega mergers kill jobs, and in the health insurance market, lead to higher prices for consumers and lower quality care,” Blumenthal said. “Instead of consolidating, I want these insurers to grow and succeed as competitors, so they can do more business and more hiring here in Connecticut.”
Sen. Amy Klobuchar», the Minnesota Democrat who serves as ranking member of the Senate Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, said in an email "blocking mergers that could raise costs and reduce competition is critical for patients across the country." «Klobuchar urged the new administration to maintain its vigilance in defending competition.
Groups representing medical professionals and hospitals welcomed the decision. American Medical Association President Andrew W. Gurman likened the battle between consumers and large insurers to David vs. Goliath, saying the decision “stopped in its tracks the creation of an immense corporate entity that would have been too big to regulate.”
The American Hospital Association, which has in the past been at odds with the AMA, said the decision will protect millions of Americans from higher insurance costs and fewer choices of providers.
But the merger can still be completed if Anthem and Cigna successfully appeal. Anthem said in a statement the decision will hurt American consumers and it “will continue to work aggressively to complete the transaction.”
But Cigna, which could walk away with about a $1.8 billion termination fee as a result of the judge’s decision, was more tempered in its statement, only saying it would “carefully review the opinion and evaluate its options.” The relationship between the two companies has been contentious, riddled with accusations against each other of undermining the agreement.
The court’s full opinion, which will be lengthier than the order released Wednesday, remains under seal for the parties to redact privileged information before its eventual release.