Anthem-Cigna merger rejected

Predicting diminished competition and probably higher costs, a federal judge has rejected Anthem Inc.’s bid to buy rival health insurer Cigna Corp.

U.S. District Judge Amy Berman Jackson said Wednesday that 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’ approaches to cost saving. Anthem has negotiated lower payments to doctors and hospitals, while Cigna has focused on preventive care in hopes of reducing future 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.

Last month, another federal judge rejected Aetna’s bid to buy rival Humana Inc., citing in part concerns about competition in Medicare Advantage markets.

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 United Health 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 repercussions for consumers from these deals would take years to materialize and could lead to savings in some areas, along with higher costs elsewhere.