Anthem reportedly faces regulator skepticism that Cigna deal can work

June 29, 2016

The U.S. Justice Department has told Indianapolis-based Anthem Inc. that the health insurer’s planned takeover of Cigna Corp. threatens competition and probably can’t be fixed by selling parts of their businesses, according to a person familiar with the matter.

The companies met Friday with Bill Baer, the department’s No. 3 official, in a bid to get their $48 billion deal approved and hear about the government’s concerns, said the person, who spoke on the condition of anonymity because the merger review is confidential. The meeting had been expected.

The Justice Department has indicated that it’s open to hearing about proposals from the company to resolve the problems, two people familiar with the matter said. Still, its skepticism that the deal can be fixed raises the likelihood that the U.S. will sue to block it. The government is on track to make a decision on the combination by around mid-July, according to another person familiar with the matter.

Spokesmen for Anthem, Cigna and the Justice Department declined to comment. In a written statement released this week, Anthem said: “Anthem and Cigna continue to be in ongoing dialogue with the Department of Justice and state regulators regarding the compelling combination of our two companies to increase consumer access to high-quality, affordable health care.”

The concerns about the deal expressed by Justice Department officials in the Friday meeting was reported earlier by financial media site MLex.

The insurers are squaring off against antitrust enforcers who have taken aggressive stances against deals to protect consumers, challenging tie-ups in industries ranging from pay-TV to oil-field services. Baer’s decision on the Cigna takeover, along with a pending deal between Aetna Inc. and Humana Inc., gives the Obama administration another opportunity to shape the future of health care—a pillar of the U.S. economy—after passage of the Affordable Care Act.

One of the department’s key concerns with the Anthem-Cigna deal is that it would reduce options for large employers that depend on insurers with national reach, one of the people said.

If the Justice Department sues to block the deal, the companies will be required to defend their deal in court, according to their merger agreement. If the acquisition is stopped on antitrust grounds, Anthem must pay Cigna a $1.85 billion fee, though Anthem could duck that payment if it establishes that a “willful breach” by Cigna led to the failure to get antitrust approval, according to the agreement.


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