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U.S. court blocks Anthem-Cigna merger, dealing blow to consolidation

February 10, 2017
Business Affairs
The office building of health insurer
Anthem is seen in Los Angeles, California
February 5, 2015.
REUTERS/Gus Ruelas
By Diane Bartz and Caroline Humer

(Reuters) - A federal judge ruled Wednesday against U.S. health insurer Anthem Inc.'s (ANTM.N) proposed $54 billion merger with smaller rival Cigna Corp. (CI.N), derailing an unprecedented effort to consolidate the country's health insurance industry.

The U.S. Justice Department sued in July to stop Anthem's purchase of Cigna, a deal that would have created the largest U.S. health insurer by membership, and Aetna Inc.'s (AET.N) planned $33 billion acquisition of Humana (HUM.N).

The merger would have worsened an already highly-concentrated market, and is likely to raise prices, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia said while issuing the ruling against Anthem's deal.

Last month, a different U.S. judge ruled against Aetna's proposed deal for Humana.

Government antitrust officials argued that both deals would lead to less competition and higher prices for Americans. The acquisitions would have reduced the number of large national U.S. insurers from five to three.

Jackson had separated the Justice Department's case into two trials. Her ruling focused only on the first one in which the Justice Department argued that the tie-up would hurt the ability of large national employers to get competitive rates for the health coverage they provide workers.

The second trial considered overlaps in the two insurers' business selling health benefits to individuals, and administering Medicare Advantage coverage to the elderly.

Anthem argued that there was enough competition because large companies with more than 5,000 employees often used multiple smaller players in the national market, but the judge disagreed.

"Regional firms and new specialized "niche" companies that lack a national network are not viable options for the vast majority of national accounts, and they will not ameliorate the anti-competitive effects of this merger," Jackson wrote.

Cigna intends to carefully review the opinion and evaluate its options in accordance with the merger agreement, it said in a statement.

Anthem said on Thursday that it intends to promptly file a notice of appeal and request an expedited hearing of its appeal to reverse the court's decision.

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