A federal judge blocked Anthem's $54 billion acquisition of Cigna, saying the merger of two of the nation's largest insurers would make it harder for large national employers to get competitive rates for health insurance.
"The evidence has shown that the merger is likely to result in higher prices," U.S. District judge Amy Berman Jackson wrote in the ruling.
"Anthem is encouraging the Court to ignore the risks posed by the proposed constriction in the health insurance industry… on the grounds that consumers might benefit from the large size of the new company in other way at the end of the day," Jackson said.
The judge agreed with the Department of Justice's argument that the combination of Anthem and Cigna would reduce the number of health insurers able to provide coverage on a national level from four to just two.
Analysts have said for months that the two firms faced an uphill battle because of their overlap in the employer market.
"This merger was really a tough one to get through from the get go, because of the concentration of national accounts and there really wasn't any way to remedy anti-competitive effects," said antitrust attorney Matthew Cantor, a partner at the law firm of Constantine Cannon.
The American Medical Association, one of a number of health care groups that had opposed the merger, welcomed the judge's ruling.
"The significant absence of health insurer competition in most markets is detrimental to patients and poses an important public policy problem," said Dr. Andrew Gurman, president of the American Medical Association, in a statement.
The ruling in the Anthem-Cigna merger follows a federal court judge's decision blocking Aetna's $34 billion acquisition of Humana last month. Both companies say they are still exploring a possible appeal.
Humana told investors it would issue a decision next week, when the extension of the companies' merger agreement expires.
A spokeswoman for Anthem said the company is reviewing the judge's order, while Cigna issued a statement saying that it "intends to carefully review the opinion and evaluate its options."
Cigna has signalled that it is ready to move past its merger agreement with Anthem. During the company's earnings conference call, CEO David Cordani noted that the firm would have $7 to $14 billion to deploy for potential deals if the merger were blocked.
Even before the companies struck a deal 18 months ago, the relationship between the two firms was contentious and their disagreement has often made its way public.
Judge Jackson noted that the friction was evident during the trial, calling it "the elephant in the courtroom." She said Cigna executives' testimony at times contradicted Anthem's arguments for the benefits of the deal.
The merger agreement calls for a $1.85 billion break-up fee if the deal is not approved. Last week, Cigna informed Anthem that it reserved the right to terminate the deal if the merger was blocked.
Given their history, Matthew Cantor would not be surprised if Anthem and Cigna wind up back in court, battling over the break-up fee.
"The bad blood has been so public… I think that you're looking at litigation," Cantor explained. "And you're also talking large, large numbers."