WASHINGTON (CN) – A federal judge on Wednesday nixed the proposed $54 billion merger of two of the nation’s largest health insurance providers over antitrust concerns.
Agreeing with the Department of Justice’s position that the merger would violate antitrust laws, U.S. District Judge Amy Berman blocked Anthem Inc. from acquiring Cigna Corp.
Regulators at the Justice Department argued that the merger would stifle competition in the U.S. marketplace for employer-provided insurance options.
Brent Snyder, acting assistant attorney general for the department’s antitrust division, called Berman’s ruling a “victory for American consumers.”
“This merger would have stifled competition, harming consumers by increasing health insurance prices and slowing innovation aimed at lowering the costs of healthcare,” he said in a statement.
Anthem’s CEO Joseph R. Swedish announced his company’s intent to appeal hours after Berman’s ruling was announced. Amid his “significant disappointment,” Swedish said that the proposed merger could have saved consumers $2 billion in medical costs annually.
“If not overturned, the consequences of the decision are far-reaching and will hurt American consumers by limiting their access to high quality affordable care, slowing the industry’s shift to value based care and improved outcomes for patients and restricting innovation which is critical to meeting the evolving needs of health care consumers,” Swedish said Thursday.
Cigna offered a more reserved response, saying it “intends to carefully review the opinion and evaluate its options in accordance with the merger agreement.”
Anthem will pay a $1.85 billion break-up fee to Cigna if it loses the appeal. While a considerable sum, Anthem won’t be too worse for wear. The company reported annual revenue of over $79 billion in 2015. Cigna yielded revenues of just under $40 billion in the same year.
New York Attorney General Eric T. Schneiderman celebrated Berman’s decision. He joined the Justice Department and 10 other states in their quest to stop to the merger last year.
On Thursday, Schneiderman released a statement emphasizing the proposed deal’s pitfalls for his own constituency.
The impact of the merger would have been especially devastating to employers covering thousands of workers. This is particularly significant in metropolitan markets like New York City. Thirty-five additional markets in the region would have also felt the pinch, Schneiderman said, adding that the merger would have lowered reimbursement rates for providers and affected access to health care services.
Combined, Anthem and Cigna already provide health insurance to 3 million of New York City’s 8.4 million residents.
Judge Berman’s decision, which is temporarily under seal so the parties can review it for confidentiality concerns, marks the second time this year a colossal health care merger has been blocked. Aetna’s attempted $37 billion takeover of competitor Humana was enjoined two weeks ago.
Representatives from Anthem and Cigna did not return a request for comment Thursday.