Predicting diminished competition and likely higher costs, a federal judge rejected health insurer Anthem's bid to buy rival Cigna.
U.S. District Judge Amy Berman Jackson on Wednesday said the merger would significantly reduce competition in the already concentrated insurance market, particularly for large national employers. Cigna and the Blue Cross-Blue Shield carrier Anthem are two of just four insurers selling coverage to big companies with employees spread across multiple states, and they compete aggressively for business, the judge wrote.
Anthem said it was "significantly disappointed" by the decision and plans to appeal.
Berman Jackson was unconvinced by Anthem's argument that the $48-billion deal could save money for customers by combining the two insurers' different approaches to cost saving. Anthem has negotiated lower payments to doctors and hospitals, while Cigna has higher upfront expenses for wellness programs in the hopes of reducing future health expenses.
"Eliminating this competition from the marketplace would diminish the opportunity for the firms' ideas to be tested and refined, when this is just the sort of innovation the antitrust rules are supposed to foster," she wrote.
Last month, another federal judge rejected insurer Aetna's roughly $34-billion bid to buy Medicare Advantage coverage provider Humana Inc., also citing competition concerns.
U.S. District Judge John Bates said federal regulation would probably be "insufficient to prevent the merged firm from raising prices or reducing benefits." He added that neither new competitors nor an Aetna plan to sell some of the combined company's business would be enough to ease competitive concerns.
Aetna Inc. has said it is strongly considering an appeal. The insurer expects to make a decision on that by next week.
The Justice Department sued last summer to block both deals, and the cases went to trial late last year. Federal regulators have pushed aggressively in recent years to block deals in several industries that they say will reduce competition.
The health insurance deals would consolidate the nation's five largest insurers into three, a list that includes UnitedHealth Group Inc., currently the biggest
The insurers have argued that by getting bigger they will be able to negotiate better prices with pharmaceutical companies, hospitals and doctor groups that also are growing. They also expect to cut expenses and add more customers, which helps them spread out the cost of investing in technology to manage and improve care.
Industry experts have said any consumer impact from these deals would take years to materialize and could lead to savings in some areas, along with higher costs elsewhere.
The American Medical Association cheered the ruling, saying the merger would have created a health care behemoth too big to regulate and with too much control over consumers' lives.
Anthem CEO Joseph Swedish also has said the Cigna deal would help stabilize pricing in the volatile public exchanges created by the Affordable Care Act. He has said that would enable his company to keep its commitment to the public exchanges, a statement seen by some as a sign Anthem might slash that business if the deal falls through.
The insurer sells coverage on exchanges in 14 states. Swedish said last week that his company is waiting to see whether the government can make some sort-term fixes to these markets before it decides how much it will participate next year.
The judge's decision surprised few on Wall Street.
Shares of Indianapolis-based Anthem Inc. climbed 65 cents to $159.25 after markets opened Thursday, while Bloomfield, Connecticut-based Cigna Corp. slipped $1.33 to $146.51. Broader indexes were nearly flat.