Mega-Mergers Blocked—What’s Next?

Federal judges have blocked the proposed mega-mergers of CIGNA with Anthem and Humana with Aetna. Rumors are now abounding about what might happen next.

Anthem is reportedly looking for its next acquisition. Any deal Anthem might make would probably be to acquire a company smaller than Cigna in order to avoid antitrust issues.

The Indiana Business Journal has reported that Anthem is planning to repurchase up to $2 billion in stock, invest an undisclosed amount in the business, and move ahead with plans to set up a new pharmacy-benefits management plan effective insurance in 2020, when its current deal with Express Scripts expires.

Last month, a judge ruled that Cigna could walk away from the merger, a few months after another judge ruled the deal would be anticompetitive. The Justice Department sued in July 2016 to block the merger, arguing it would further consolidate an already concentrated market and lead to higher costs for employers.

Under the terms of the merger agreement between Anthem and CIGNA, Anthem was required to lead the regulatory approval process and to use its reasonable best efforts to obtain approval. CIGNA believes that Anthem willfully breached those obligations and that the transaction did not receive the required approvals as a result. CIGNA therefore terminated the merger agreement with Anthem and is seeking prompt payment of a $1.85 billion reverse termination fee and has announced that it will pursue claims for additional damages of over $13 billion against Anthem for the harm it caused CIGNA and its shareholders.

Almost simultaneously, Anthem delivered to CIGNA a notice terminating the merger agreement. Anthem said that CIGNA’s repeated willful breaches of the merger agreement sabotaged the transaction and caused Anthem to suffer massive damages. Anthem has said that it intends to vigorously pursue claims against CIGNA.

All this came after a judge approved CIGNA’s request to walk away from the merger. The judge said Anthem did not deserve a 60-day extension to an earlier order barring CIGNA’s exit because it was incredibly unlikely the company could close the merger deal. The judge also said there was significant evidence CIGNA may have violated the merger agreement by dragging its feet on antitrust concerns, which could entitle Anthem to potentially massive damages.

The month before that ruling, the District of Columbia Court of Appeals said that a bigger company would not be better for consumers and upheld a lower court ruling that blocked the merger. Anthem had appealed the lower court’s ruling on the grounds that the court improperly declined to consider the medical savings that could result from the merger, while CIGNA wanted out of the agreement. The appellate court said the district court did not abuse its discretion.

Previously, Aetna and Humana reached a peaceful ending of their planned merger. The Aetna/Humana deal had also been blocked due to antitrust concerns. Aetna had claimed that it was pulling out of all but four of the 15 States where it was providing individual health insurance on the Exchanges because of a business decision. A Federal judge ruled that was a false claim and that Aetna made its decision at least partially in response to the Federal antitrust lawsuit that sought to block the proposed merger.

About John Garner

John Garner has over thirty five years of experience in employee benefits. He specializes in compliance, health care reform, the Health Insurance Portability and Accountability Act (HIPAA), the Consolidated Omnibus Budget Reconciliation Act (COBRA), and the Employee Retirement Income Security Act (ERISA). He helps clients with life, health, and disability benefits, cost containment, flexible benefits, and claim consulting.

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