Breaking News Judge Amy Berman Jackson of the Federal District Court for the District of Columbia is expected to rule against the Anthem-Cigna merger on anti-trust grounds, sources have informed the New York Post. In anticipation of the appeal, Anthem has already filed an extension to the merger deadline from 31 January to 30 April, which Cigna is reportedly opposing in hopes of killing the merger.
The lawsuit was brought by the Department of Justice after Senate anti-trust subcommittee hearings and the displeasure of many state insurance regulators [TTA 21 July]. The hearing starting 21 November had two phases: the first on the merger’s effect on national employers, the second starting 12 Dec on local markets [TTA 21 Nov]. The huge stumbling block, according to the report, is Anthem’s unresolved conflict in a merger due to the ‘Blues Rule’, which requires that they have no more than one-third of its marketed products from other insurers in a state where they also market Blue Cross Blue Shield plans. Anthem is the licensee for Blue plans in 15 states, and according to court testimony by Anthem VP of corporate development Steven Schlegel, may have faced a $3 bn (£2.43 bn) penalty. This likely would have come from the Blue Cross Blue Shield Association, the licensor. Anthem’s hope reportedly was to transfer Cigna customers to its Blue plans to balance this out.
The NYP report also adds fuel to two years of rumors concerning governance and management succession conflicts between the two insurers. One revelation in the DOJ complaint was that in April 2016 “Anthem had established a separate, highly confidential team to work on integration planning without Cigna’s participation”. Earlier reports publicized that Cigna hoped that the DOJ lawsuit would have killed the merger; now Cigna wants no extension and to collect its $1.85 bn breakup fee. Sounds like a Fatal Case of Merger Remorse. Stay tuned.
The separate Aetna-Humana hearing concluded on 30 December under a different DC District Judge, John D. Bates. Arguments here focused on overlaps in two areas: exchange policies (sold by Aetna in only four states, with overlap in 17 counties) and Medicare Advantage monopolies or near-monopolies. The judge’s ruling is still pending. Bloomberg, Hartford Courant, which lets hometown Aetna have its say.