Appeals Court Blocks Anthem Bid to Merge with Rival Cigna

Appeals Court Blocks Anthem Bid to Merge with Rival Cigna

But the Justice Department said Anthem had no real plan to reach those savings.

Consumer groups and medical organizations also objected to the merger, which would have resulted in the country's largest health insurer.

Insurers made the deals as they adjusted to new pressures from the insurance overhaul of Obamacare, officially known as the Affordable Care Act. Cigna, through a company lawyer, said it has no comment at this time.

The Justice Department said it was pleased with the decision and that the merger would have raised prices and slowed innovation.

The federal appeals court in Washington upheld a lower court ruling by a 2-1 vote, according to an order issued Friday. Indianapolis-based Anthem declined less than 1 percent to $177.89. Rivals Aetna Inc (AET.N) and Humana Inc (HUM.N) had also sought to merge but that deal collapsed this year amid opposition from the federal government and states. The agency also blocked Aetna Inc.'s planned merger with Humana Inc.

The companies still have the option of another appeal to try to save the deal. The Anthem-Cigna merger is the largest proposed merger in the history of the health insurance industry, the appeals court notes.

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.

"Anthem has not explained why these projected savings would even exist", Judge Judith Rogers wrote in the opinion.

Cigna shares have been trading well below the value of the deal as investors have been skeptical of a reversal by the courts.

The American Medical Association applauded the decision and had submitted an amicus brief to the appellate court in support of preserving the merger injunction. "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", said AMA President Andrew W. Gurman.

"The problem for this merger, if there is one, is in its effects in the upstream market - namely, in its effects on hospitals and doctors as a result of Anthem-Cigna's enhanced negotiating power". If not, Kavanaugh said, he'd have allowed the combination.

Circuit Court Judge Brett Kavanaugh dissented saying cost savings would be passed on to consumers. Rogers was nominated by another Democrat, President Bill Clinton, in 1993.

After Judge Jackson blocked the deal, Cigna and Anthem sued each other in DE state court, where litigation continues.

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