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From Health Reform WK-EDGE, February 17, 2017

Swan song for Anthem’s acquisition of Cigna?

By Kathryn S. Beard, J.D.

For the second time in less than 20 days, the proposed joinder of two health insurance giants was stopped by the courts. In an opinion that is temporarily under seal to allow the parties to review for confidentiality, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia found that Anthem, Inc.’s proposed acquisition of Cigna Corp. would harm customers and result in higher insurance prices. The Department of Justice (DOJ), which sued to stop the merger along with 11 states and the District of Columbia, cheered Jackson’s decision for protecting consumers. A growing rift between the two companies continued, with Anthem vowing to appeal the decision, while Cigna’s response was more reserved.

WK Note: After our deadline for Health Reform WK-EDGE, Cigna announced that it was exercising its right to terminate the merger agreement, while Anthem filed a lawsuit to enjoin Cigna from terminating the agreement. Our full analysis will be in the February 22, 2017, newsletter.

In 2015, proposed mergers were announced between four of the five largest health insurance companies in the United States. In addition to Anthem’s proposed acquisition of Cigna, Aetna, Inc. attempted to purchase Humana Inc. and the subject quickly came under scrutiny (see To merge or not to merge, that was the question before a Senate subcommittee, September 24, 2015). While the companies indicated that the proposed acquisitions were in response to the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), concerns about the resultant impact on the Medicare Advantage (MA) program were raised, in addition to concerns about stifling competition and slowing innovations. In July 2016, the DOJ filed lawsuits to prevent the two transactions, and the idea that Anthem and Cigna were not necessarily on the same page about the acquisition came to light as Cigna appeared less-than-enthusiastic about fighting the DOJ (see DOJ lawsuit steps in between Aetna-Humana and Anthem-Cigna mergers, July 21, 2016).

According to the New York Times, Jackson’s opinion found that the proposed deal would eliminate Anthem and Cigna’s vigorous competition, reduce the number of national carriers, and diminish prospects for innovation in the market. The merger, which was initially approved by shareholders of both companies, turned contentious as DOJ filings in the suit noted that both companies had accused the other of breaching the merger agreement. In her opinion, Jackson wrote about the "remarkable circumstances" that became apparent over the course of the trial with Cigna declining to agree with Anthem’s findings of fact and a rift between the two companies’ CEOs. In response to the court’s decision, the two companies remained at odds, with Cigna stating its intention to "carefully review the opinion and evaluate its options," while Anthem vowed to promptly appeal the decision.

Jackson’s decision follows the recent decision of her colleague Judge John Bates, who found that Aetna’s attempt to purchase Humana would substantially lessen competition in the markets for individual MA plans and on the ACA’s health insurance exchanges. In a blistering opinion, Bates determined that Aetna withdrew from competition in some exchanges "specifically to evade judicial scrutiny of the merger" (see Aetna’s $37 billion purchase of Humana enjoined, January 23, 2017; see also Aetna, Humana plan separate futures after dissolving merger plans, in this issue). Because Jackson’s opinion is under seal, it is unclear which findings of fact she relied upon; once it becomes available, Wolters Kluwer Legal & Regulatory U.S. will provide a full analysis.

The case is captioned U.S. v. Anthem, Inc., and is Case No. 1:16-cv-01493 (ABJ).

Stay tuned to Health Reform WK-EDGE for updates in this developing case.

Companies: Anthem, Inc.; Cigna Corp.; Aetna, Inc.; Humana Inc.

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