TIE-UP CODE BLUE
Judge seen as pulling sheet over Anthem- Cigna
A federal judge is expected in the coming days to block a proposed mega-merger between Anthem and Cigna — a $54 billion deal that would create the nation’s biggest health insurer, sources told The Post.
In what looked like a bid to get ahead of the judge’s smackdown, Anthem said in a public filing early Thursday it is extending the expiration of the merger agreement to April 30 from Jan. 31.
Indeed, sources said Anthem may appeal any ruling that doesn’t go its way. Insiders expect that US District of Columbia Judge Amy Berman Jackson will rule against it on antitrust concerns.
President Obama’s Department of Justice sued Anthem in July, alleging the merger would stifle competition in the US health care industry. The case went to trial in November.
A ruling by Jackson against the tie-up will likely spark a battle between the corporate giants. Cigna is looking to fight any merger extension as it looks to wriggle out of the deal and collect a $1.85 billion breakup fee from Anthem, according to insiders.
Cigna said in a statement it had received notice of Anthem’s extension and it would evaluate its options after the court ruling.
According to sources, Cigna believes the bench trial in November produced testimony that shows An them didn’t hold up its end of the merger deal.
For example, a key to the deal was Anthem having a plan worked out to maintain the Blue Cross/Blue Shield networks it operates exclusively in 14 states, including one in New York City.
Blue rules require, however, that an exclusive carrier have no more than one-third of its marketed products from other insurers in a given state. A combined Anthem and Cigna would exceed that threshold, according to court papers.
On July 25, 2015, Anthem Chief Executive Joseph Swedish said on an analyst call that Anthem in the merger did not “anticipate any issues regarding so-called Blue rules in large measure.”
Yet in court testimony on Nov. 30, Anthem Vice President of Corporate Development Stephen Schlegel said Anthem was facing the possi- bility of a $3 billion penalty for having too much of its business being non-Blues related.
Anthem was hoping to transfer Cigna customers to its Blues networks, according to court papers.
The merger agreement requires all parties to promptly obtain all consents from third parties in order to consummate the merger.
On May 24, 2016, Swedish said at a UBS conference, “The reality is the [integration] process [between the companies] is working very well. ... We’re meeting deadlines on all the submittals.”
A month earlier, in April 2016, however, Anthem had established a separate, highly confidential team to work on integration planning without Cigna’s participation, according to the Justice Department complaint.