(Reuters) - A federal judge on Wednesday ruled 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 anticompetitive 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.

PROTECTING CONSUMERS

Acting Assistant Attorney General Brent Snyder of the Justice Department’s Antitrust Division said the ruling had prevented American consumers from facing higher health insurance premiums and less innovation.

Bill Baer, who was head of the Justice Department’s antitrust division when it decided to sue to block both the insurance deals but has since left the agency, also hailed the decision. “Together with the decision on Aetna and Humana, this preserves five large national providers of critically important health insurance products,” he said.

The fifth player, UnitedHealth Group Inc. (UNH.N) was not involved in the deals.

Some Wall Street analysts expect all four of the companies to now move on, although Aetna and Humana have not committed to doing so. Their deal expires Feb. 15.

“The likelihood of success in an appeal would be very low,” said Matthew L. Cantor, a partner in the law firm of Constantine Cannon in New York. He noted points in the judge’s order about the concentrated national market, the high barrier to entry for competitors, and the companies’ roles as direct competitors.

The deals were announced at a time when former President Barack Obama’s national healthcare reform law was fully in place and the four insurers were growing in the individual insurance market it established. The insurers said new costs, from higher taxes to investments in new Obamacare products, were driving their need for scale.

That landscape is less certain now. Aetna and Humana have cut back Obamacare enrollment for 2017 after losses, and President Donald Trump and fellow Republicans are weighing a “repeal and replace” path for Obamacare.

More deals may be in the offing, JPMorgan analyst Gary Taylor said in a research note. “Given Anthem and Cigna’s pursuit of Humana in 2015, we think new potential combinations could emerge.” He does not expect shares in either Anthem or Cigna to move given that investors had expected this ruling.

Cigna is entitled to receive from Anthem a $1.85 billion break-up fee if the deal fails to win regulatory approval, according to the merger agreement. The agreement also requires Cigna to have put forth its best effort on that front.

The office building of health insurer Anthem is seen in Los Angeles, California February 5, 2015. REUTERS/Gus Ruelas

But Anthem and Cigna disagreed about the deal in court, Jackson wrote in her order, with Cigna refusing to sign off on Anthem’s interpretation of how the companies could garner savings.

Anthem is the largest member of the Blue Cross Blue Shield Association and operates BCBS plans in 14 states. It and said it could apply its discounts to Cigna members while Cigna said its collaborations with doctors would save money.

Pre-merger integration was stalled and incomplete, the judge said.</s>A federal judge on Wednesday ruled against U.S. health insurer Anthem Inc’s proposed $54 billion merger with smaller rival Cigna Corp, 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 planned $33 billion acquisition of Humana.

On Wednesday, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia issued the ruling against Anthem’s deal under seal. Last month, a different U.S. judge ruled against Aetna’s proposed deal for Humana.

Berman had separated the Justice Department’s case into two trials. In one, she weighed arguments over whether 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.

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. Cigna is entitled to receive from Anthem a $1.85 billion break-up fee if the deal fails to win regulatory approval.

Officials from both companies were not immediately available for comment. The Justice Department argued that the deal would likely lead to higher prices for big, nationwide employers whose workers use a broad network of services. It additionally argued that the two companies were the biggest options for large-group employers in at least 35 metropolitan areas.

Eleven states and the District of Columbia joined the Justice Department in fighting the deal.

Anthem has argued that merging with Cigna would allow it to get bigger and push down prices to customers. Anthem, the largest member of the Blue Cross Blue Shield Association, has said it is not truly a national insurance company because it is only in 14 states.</s>DENVER BUSINESS JOURNAL - A federal judge has blocked health insurer Anthem Inc.’s $54 billion acquisition of rival insurer Cigna Corp. in response to a challenge filed by Colorado Attorney General Cynthia Coffman along with 10 other states, the District of Columbia and the U.S. Justice Department.

D.C.-based U.S. District Judge Amy Berman Jackson ruled that Anthem’s acquisition of Cigna would violate federal antitrust laws and would likely drive up prices for customers.

Anthem (NYSE: ANTM) and Cigna (NYSE: CI) are respectively the No. 2 and 3 preferred-provider organizations in Colorado, after UnitedHealthcare, according to DBJ List research.

In blocking the merger, the court ruled that the proposed merger would likely substantially lessen competition and impact consumer choice in the sale of health insurance to “national accounts” – customers with more than 5,000 employees, usually spread over at least two states – within the 14 states where Anthem operates, including Colorado.

Read more at the Denver Business Journal: http://bit.ly/2lvgqjZ</s>A federal judge on Wednesday rejected Anthem Inc.'s bid to buy rival health insurer Cigna Corp., saying the merger would likely lead to higher costs, less competition and diminished innovation. U.S. District Judge Amy Berman Jackson said the merger would significantly reduce competition in the already concentrated insurance market, particularly for large national employers.

Start the conversation, or Read more at Canada.com.</s>(Reuters) - A U.S. federal judge on Wednesday ruled against health insurer Anthem Inc's proposed $54 billion merger with smaller rival Cigna Corp, a deal that would have created the largest U.S. health insurer by membership.</s>A federal judge on Wednesday ruled against U.S. health insurer Anthem's proposed $54 billion merger with smaller rival Cigna, 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's planned $33 billion acquisition of Humana.



On Wednesday, Judge Amy Berman Jackson of the U.S. District Court for the District of Columbia issued the ruling against Anthem's deal under seal. Last month, a different U.S. judge ruled against Aetna's proposed deal for Humana.

Berman had separated the Justice Department's case into two trials. In one, she weighed arguments over whether 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.</s>SACRAMENTO, Calif. (AP) — A federal judge is rejecting Anthem Inc.’s bid to buy rival health insurer Cigna Corp., saying the merger would likely lead to higher costs, less competition and diminished innovation.

U.S. District Judge Amy Berman Jackson issued the ruling on Wednesday.

Jackson says the merger would significantly reduce competition in the already concentrated insurance market, particularly for large employers. Just four insurers sell to companies with at least 5,000 employees spread across multiple states, and the judge says Cigna and Anthem aggressively compete for their business.

Anthem spokeswoman Jill Becher says company officials are reviewing the decision.

The U.S. Department of Justice sued last summer to block the Anthem-Cigna deal and another major acquisition, Aetna’s plan to buy Humana. A judge rejected the Aetna-Humana union last month.</s>A federal judge on Wednesday ruled against Anthem Inc. in its quest to buy rival health insurer Cigna Corp., saying the merger could potentially lead to an increase in costs and less competition.

U.S. District Judge Amy Berman Jackson issued the ruling against Anthem.

Jackson said the merger would significantly reduce competition in the insurance market, particularly for large employers. Just four insurers sell to companies with at least 5,000 employees spread across multiple states, and the judge says Cigna and Anthem aggressively compete for their business.

A spokeswoman for Anthem has said officials for the company are reviewing the decision.

According to Reuters, the U.S. Department of Justice sued in July to block the Anthem-Cigna deal and another major acquisition, Aetna's $33 billion plan to buy Humana. A judge rejected the Aetna-Humana union last month.

The Associated Press contributed to this report.</s>A federal judge on Wednesday ruled against Anthem Inc. in their quest to buy rival health insurer Cigna Corp., saying the merger could potentially lead to an increase in costs and less competition.</s>A federal judge on Wednesday rejected Anthem Inc.’s bid to buy rival health insurer Cigna Corp., saying the merger would likely lead to higher costs, less competition and diminished innovation.

U.S. District Judge Amy Berman Jackson said the merger would significantly reduce competition in the already concentrated insurance market, particularly for large national employers. Cigna and Anthem are two of just four insurers selling to companies with 5,000 employees spread across multiple states, and they compete aggressively for business, the judge wrote.

Berman Jackson was unconvinced by Anthem’s argument that the merged company could save money for customers by combining the two insurers’ different approaches to cost saving. Anthem has negotiated lower payments to doctors and hospitals, while Cigna has higher upfront expenses for wellness in the hopes of reducing future health expenses.

“Eliminating this competition from the marketplace would diminish the opportunity for the firms’ ideas to be tested and refined, when this is just the sort of innovation the antitrust rules are supposed to foster,” she wrote.

Anthem officials are reviewing the decision, spokeswoman Jill Belcher said. She declined to comment.

Last month, another federal judge rejected Aetna’s roughly $34-billion bid to buy rival Humana, citing in part concerns about competition in hundreds of Medicare advantage markets.

Washington, D.C.-based U.S. District Judge John Bates said in an opinion filed Jan. 23 that federal regulation would probably be “insufficient to prevent the merged firm from raising prices or reducing benefits.” He added that neither new competitors nor an Aetna plan to sell some of the combined company’s business to another insurer, Molina Healthcare Inc., would be enough to ease competitive concerns.

An Aetna spokesman has said the company is strongly considering an appeal.

The Justice Department had sued last summer to block both deals, and the cases went to trial late last year.

The two deals would have consolidated the nation’s five largest insurers into three, a list that includes UnitedHealth Group Inc., currently the largest.

The insurers have argued that by getting bigger they will be able to negotiate better prices with pharmaceutical companies, hospitals and doctor groups that also are growing. They also expect to cut expenses and add more customers, which helps them spread out the cost of investing in technology to manage and improve care.

Industry experts have said any consumer impact from these deals would take years to materialize and could lead to savings in some areas, along with higher costs elsewhere.

The American Medical Association cheered the ruling, saying the merger would have created a health care behemoth too big to regulate and with too much control over consumers’ lives.

“In a David vs. Goliath battle between consumers and mega insurers, a federal judge today ruled that Anthem’s proposed acquisition of Cigna poses a clear and present threat to the quality, accessibility and affordability of health care in the United States,” Dr. Andrew Gurman, the AMA president, said in a statement.

Anthem CEO Joseph Swedish also has said the $48-billion Cigna deal would help stabilize pricing in the volatile public exchanges created by the Affordable Care Act. He has said that would enable his company to keep its commitment to the public exchanges, a statement seen by some as a sign that Anthem might slash that business if the deal falls through.

The Indianapolis-based insurer, which sells Blue Cross-Blue Shield coverage in key markets like California and New York, offers plans on exchanges in 14 states and covers 839,000 people.

Many insurers have struggled developing their business on the exchanges. Swedish said on Feb. 1 that his company is waiting to see whether the government can make some sort-term fixes for these markets before it decides how much it will participate next year.

He said Anthem is concerned about a health insurance tax and special enrollment periods that expensive customers use to sign up for coverage only when they need insurance, among other issues.

The Justice Department has pushed aggressively in recent years to block deals in several industries that they say will reduce competition. The Swedish company Electrolux and oil and gas service provider Haliburton both walked away from multi-billion-dollar deals after being sued by regulators.
The U.S. District Court for the District of Columbia blocks health insurer Anthem Inc.'s proposed $54 billion merger with rival Cigna because it would have exacerbated an already highly concentrated market and likely raised prices.