(In 9th paragraph, correct's description of Bill Baer to former
head of the Justice Department's Antitrust Division, not former
head of the Justice Department.)
By Diane Bartz
WASHINGTON, April 28 A U.S. appeals court on
Friday blocked health insurer Anthem Inc's bid to merge
with Cigna, upholding a lower court's decision that the
$54 billion deal should not be allowed because it would lead to
higher prices for healthcare.
The ruling will probably kill the proposed merger that was
opposed by the U.S. Justice Department, 11 states and a district
court judge after consumers, medical professionals and others
objected to it. In the end, Cigna itself tried to back out.
The companies have the option of trying to save the deal by
asking the appeals court to re-consider the case or appealing
straight to the U.S. Supreme Court.
Two hours after the decision, Cigna traded at $155.65 and
Anthem was at $177.45. Both were down less than half a percent.
Anthem's purchase of Cigna would create the largest U.S.
health insurer. Rivals Aetna Inc and Humana Inc
had also sought to merge but that deal collapsed this year amid
opposition from the federal government and states.
Insurers made the deals as they adjusted to new pressures
from the insurance overhaul of Obamacare, officially known as
the Affordable Care Act. Now they face the potential for another
remaking of the industry, though the exact changes are unclear
because of Republican disagreements over how to repeal and
In a split decision, the U.S. Court of Appeals for the D.C.
Circuit disagreed with Anthem's contention that the Justice
Department and lower court improperly rejected its assertions
that the deal would lead to billions of dollars in medical
"Anthem has not explained why these projected savings would
even exist," Judge Judith Rogers wrote in the opinion. "The
record is clear that Anthem, unlike Cigna, has already achieved
whatever economies of scale are available."
Bill Baer, a former head of the Justice Department's
Antitrust Division, said in an email the decision "is a ringing
endorsement of the importance of competition in health insurance
Baer made the decision to challenge both insurance mergers.
New York Attorney General Eric Schneiderman said he was
"pleased" with the ruling and contended the deal would likely
lead to higher premiums and lower quality.
In a dissent, Judge Brett Kavanaugh argued that the merger
would benefit the biggest customers, mainly large companies with
employees in many states. Kavanaugh argued that a combined
Anthem/Cigna would require higher payments to manage the
accounts but that would be offset by better negotiated rates
paid to providers.
Anthem, a member of the Blue Cross Blue Shield Association,
is the second biggest seller of medical insurance to big U.S.
companies. Cigna is in third place.
"This is a red letter day for consumers," said David Balto,
who organized opposition to the deal.
In another obstacle to the deal, Anthem and Cigna are suing
each other. Cigna has sought to abandon the merger and force
Anthem to pay a $1.85 billion breakup fee while Anthem filed a
lawsuit to force its smaller rival to go through with the
Anthem and the Justice Department did not immediately
respond to a request for comment on the appeals court decision.
(Reporting by Diane Bartz; Editing by David Gregorio)