On Wednesday a federal judge ruled against the merger between major health insurance companies Anthem Inc and Cigna Corp after the Justice Department determined that the deal would hold back competition in the health insurance market and raise prices.
Back in July, U.S. Justice Department had sued to stop the $54 billion purchase proposed by Anthem to its smaller rival, Cigna. The deal would have created the largest U.S. health insurer by membership, said Reuters.
Judge Amy Berman Jackson of U.S. District Court for Columbia issued the ruling, arguing that the deal would have worsened and already highly concentrated market, American consumers would face higher premiums and less innovation, explained Reuters.
A month prior, another judge had done the same for Aetna’s $33 billion acquisition of Humana. The argument was the same considering the blocked deal would have reduced the number of large national U.S. insurers from five to three.
Then-Attorney General Loretta Lynch coincided with the judge’s ruling, suggesting that if the merger were allowed to proceed it would substantially reshape the health insurance industry.
Lynch added that competition among the insurers has normally pushed them to provide lower premiums, higher quality care, and better benefits, which tens of millions of Americans rely on for health care.
Acting Assistant Attorney General Brent Snyder also applauded the decision as a victory for American consumers, revealed The Two-Way.
The trial
Judge Jackson separated the case into two trials. In the first one, the Justice Department referred to the weakening of the large national employer’s ability to get competitive rates for their worker’s health coverage in the case that the merge took place.
The second trial contemplated the overlaps between the two insurance provider’s business selling health benefits to individuals and managing Medicare Advantage coverage for the elderly. Jackson’s ruling focused only on the first trial, as told by Reuters.
On their hand, Anthem refused the claims about market competition observing that big companies often use multiple smaller players. Jackson disagreed.
Spokespeople on both fronts of the merging declined to comment on the verdict.
Some Wall Street analysts presume all four of the companies will move on, although Aetna and Humana have not committed to doing so. Their deal lapses February, 15th.
Mattew L. Cantor, a partner in Constantine Cannon New York Law firm predicts that a possible appeal is not very likely to be successful. Cantor pointed out the obstacles competitors face when trying to enter the concentrated market and the companies’ roles as direct competitors as some of the judge’s strong arguments.
If the deal fails to win regulatory approval, Cigna is entitled to receive $1.85 billion break-up fee from Anthem, as long as Cigna is guaranteed to have put forth its best effort for the cause, stated the merger agreement, as told by Reuters.
The deals were announced when ex-president Obama’s healthcare reform was still in place. The insurance companies were growing and new costs were pushing their need to scale. As Trumps discusses plans of revoking the Obamacare statute, the future scenario seems more uncertain.
Sources: Reuters