Proposed Anthem-Cigna Merger Terminated Following Appeals Court Ruling

A proposed merger between health insurance giants Anthem and Cigna Inc. has finally hit a dead end.

Anthem issued a statement last month terminating the proposed merger after a U.S. appeals court upheld a lower district court ruling blocking the merger on the grounds that it would have diminished competition and raised prices for consumers. Cigna exited the agreement in February after another district court ruling blocked the merger, and now the two companies are feuding over the terms of disengagement.

“In light of [the appeals court] decision and Cigna’s refusal to support the merger, … Anthem has delivered to Cigna a notice terminating the Merger Agreement,” according to a statement from Anthem. “Cigna has failed to perform and comply in all material respects with its contractual obligations. As a result, Cigna is not entitled to a termination fee. On the contrary, Cigna’s repeated willful breaches of the Merger Agreement and its successful sabotage of the transaction has caused Anthem to suffer massive damages, claims which Anthem intends to vigorously pursue against Cigna.”

The statement effectively puts an end to the merger, which was first proposed in September 2015.

APA and other medical groups strongly opposed the Anthem-Cigna merger, as well as a potential consolidation between Aetna and Humana, also blocked by the courts. APA leaders met with officials from the Department of Justice about the dangers of the proposed mergers. They argued that the mergers would be detrimental to health care generally, but could especially be harmful to patients with mental illness because the mergers would diminish competition in setting rates and determining conditions of psychiatrist participation in health networks. APA also emphasized to the department that diminished access could result in violations of the federal Mental Health Parity and Addiction Equity Act.

“The trend toward consolidation in the insurance market is a troubling one that threatens patient choice, which is critical in our health care system,” said then APA President Maria A. Oquendo, M.D., Ph.D. “We are pleased that the court sided with the Justice Department and agreed that the Anthem-Cigna merger would reduce competition and limit patients’ coverage options.”

APA CEO and Medical Director Saul Levin, M.D., M.P.A., concurred. “The termination of the Anthem- Cigna merger ends a long chapter in which the AMA, along with APA and other medical specialties, fought to preserve competition in the health insurance market and prevent insurers from acquiring unprecedented market power that would have been detrimental to network adequacy and to patients,” Levin said. “APA will continue to advocate on behalf of patients and physicians to foster more competitive health insurance markets.”

In the April 28 ruling by the U.S. Court of Appeals of the District of Columbia, Judge Judith Rogers, writing for the majority, said the U.S. District Court of the District of Columbia was correct in its February ruling that whatever market efficiencies might be achieved by consolidation were not sufficient to outweigh the harm to competition.

“[W]e hold that the district court did not abuse its discretion in enjoining the merger based on Anthem’s failure to show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger in the 14 Anthem states: the loss of Cigna, an innovative competitor in a highly concentrated market,” the judge wrote. “Additionally, we hold that the district court did not abuse its discretion in enjoining the merger based on its separate and independent determination that the merger would have a substantial anticompetitive effect in the Richmond, Virginia, large group employer market.”

Consolidation in the insurance market has been a growing concern among physician and patient advocacy groups in the past several years. In September 2015, soon after the merger was proposed, the AMA released “Competition in Health Insurance,” an annual analysis of insurance markets that showed nearly half of all states could see diminished competition in local health insurance markets if the Anthem-Cigna and Aetna-Humana mega-mergers were allowed to proceed.

“The U.S. Court of Appeals of the District of Columbia sent a clear message to the health insurance industry: a merger that smothers competition and choice, raises premiums, and reduces quality and innovation is inherently harmful to patients and physicians,” said AMA President Andrew W. Gurman, M.D., in a statement in response to the appellate court ruling. ■

The ruling by the U.S. Court of Appeals of the District of Columbia can be accessed here. “Competition inHealth Insurance” is available here.