But antitrust lawyers and analysts say the U.S. district court ruling will be tough to overturn.
Judge Amy Berman Jackson ruled late Wednesday that the merger would be anticompetitive because it would leave large national employers with less choice. She also rejected Anthem's argument that the combined firm could reduce costs and pass on $2 billion savings to consumers, noting that Cigna's testimony in court contradicted Anthem's claims. The hostility between the two companies was so pronounced she called it "the elephant in the courtroom."
"She's made all of the points, but particularly the 'elephant in the room," Leerink analyst Ana Gupte said of the judge's ruling. "With Cigna and Anthem, with their conflict … I think she rightly challenges the two companies' ability to realize those efficiencies."
Anthem CEO Joseph Swedish expressed disappointment with the ruling, saying in a statement that "if not overturned, the consequences of the decision ... will hurt American consumers."
Antitrust attorneys give Anthem low odds of winning an appeal, but they say the move will help in the insurer in its next legal battle with Cigna over the $1.85 billion merger breakup fee.
"I think what's been happening for a long time here is that the parties have been fighting one another more than they've been fighting the government," said antitrust attorney Matthew Cantor, a partner with the law firm Constantine Cannon. "I think they've been positioning to create a record, so that they can substantiate their [claims]."
"They do have a merger agreement through April," said Gupte. "It buys them time to think about their strategy to challenge this breakup fee … and I think that they will challenge it legally."
What happens next for the health insurers?
Analysts think Anthem and Cigna are headed for a split, and that Humana and Aetna's deal will also end in a breakup. And then, despite the uncertainty over health insurance reform in Washington, we could see a whole new round of insurance deals.
Cigna CEO David Cordani has hinted to investors that it has the cash to make a sizable acquisition, even without the merger breakup fee. He lost out to Aetna when he made a bid for Medicare advantage powerhouse Humana, two years ago.
Now that the court has also blocked Aetna and Humana's $34 billion deal, analysts and investors think Cordani may try again to get the one that got away.
"Post the Trump win and the election, I think [health officials] will be far more lenient to Medicare," when it comes to regulatory pressure, said Gupte. She thinks the new administration will try to support more expansion of the private Medicare Advantage market.
"So … all three companies — Aetna, Anthem, Cigna — need to shore up their senior platform. And Humana is the prize here," she said.
Humana and Aetna's merger agreement expires next week. The companies have said they will update investors on whether they're breaking up or staying together after Valentine's Day.
Following Wednesday's ruling, Humana shares rose 3.7 percent, while Anthem's shares rose nearly 2 percent. Cigna and Aetna shares saw fractional moves.