This is a picture of the Anthem Blue Cross and Blue Shield logo at the company's Wallingford headquarters
Anthem Blue Cross and Blue Shield’s Wallingford office Arielle Levin Becker / CT Mirror
Anthem Blue Cross and Blue Shield’s Wallingford office Arielle Levin Becker / CT Mirror

(Updated at 6:30 p.m. EST)

Washington – A federal appeals court on Friday agreed with a lower court that Anthem’s proposed $54 billion merger with Cigna would be anti-competitive and should not be allowed, but Anthem said it plans to continue pursuing the deal.

In a statement released late Friday Anthem said, “We are committed to completing the transaction and are currently reviewing the opinion and will carefully evaluate our options.”

Anthem still has the option of trying to save the deal by asking the appeals court to re-consider the case or appealing straight to the U.S. Supreme Court.

But the appeals court’s decision was highly critical of the merger and may have left little legal wiggle room.

In a 2-1 vote, the appeals court in Washington, D.C., upheld the lower court ruling blocking the merger, probably ending the two-year campaign to complete a marriage between two of the largest insurers in the United States.

“We hold that the district court did not abuse its discretion in enjoining the merger based on Anthem’s failure to show the kind of extraordinary efficiencies necessary to offset the conceded anticompetitive effect of the merger,” the judges wrote.

Both Anthem and Cigna are leaders in “national accounts,” another name for large group policies.

The U.S. Circuit Court for the District of Columbia agreed with the lower court  that “Anthem had failed to demonstrate that its plan is achievable and that the merger will benefit consumers as claimed in the market for the sale of medical health insurance to national accounts in the fourteen Anthem states…”

The court said it also was concerned the merger would quash Cigna’s innovative approach to lowering health care costs through policies that encouraged preventive treatment and monitoring of patients to make sure they were following their doctors’ orders.

“Paying less to get less is not an efficiency; it is evidence of the anticompetitive consequences of reducing competition and eliminating an innovative competitor in a highly concentrated market,” the court said.

Anthem said it “is disappointed by today’s decision given that the demonstrated efficiencies make this a pro-competitive, consumer friendly transaction.”

“Combining Anthem and Cigna would positively impact the health and well-being of millions of Americans and deliver significant cost savings to consumers,” the Indiana-based insurer said.

Bloomfield-based Cigna was a reluctant partner in the merger and has a pending lawsuit in a Delaware chancery court to end its relationship with Anthem. In that suit, Cigna seeks a $1.85 billion breakup fee from Anthem and another $13 billion in damages resulting from the merger effort.

The appellate court’s opinion underscored the prickly relationship between the insurers.

“Cigna officials provided compelling testimony undermining the projections of future savings” that Anthem proffered, the court said.

Both the U.S. District Court and the appeals panel based their decision to stop Anthem’s tie-up with Cigna on the Clayton Act, which says  a merger between two companies may not proceed if “in any line of commerce or in any activity affecting commerce in any section of the country, the effect of such [merger] may be substantially to lessen competition.”

The decision was hailed by a number of medical associations that opposed further consolidation in the health care industry, in large part because it would give insurers more clout to drive down fees for hospitals and doctors.

“The appellate court sent a clear message to the health insurance industry: A merger that smothers competition and choice, raises premiums and reduces quality and innovation is inherently harmful to patients and physicians,” said AMA President Andrew W. Gurman, M.D.

A number of consumer groups were also glad of the decision.

“We are pleased that the court ruled in favor of consumers, finding no evidence that everyday people would see any cost savings or benefit from this anti-competitive mega-merger,” said Frances. G. Padilla, president of Universal Health Care Foundation of Connecticut.

She said with Connecticut’s Affordable Care Act exchange, Access Health CT, concerned it may not have any insurers offering policies in the 2018 enrollment year, “this is no time to see a reduction in the number of insurers in Connecticut.”

Access Health currently has two insurers selling policies in its marketplace, Anthem and ConnectiCare.

Sen. Richard Blumenthal, D-Conn., another opponent of the merger, said, “The appeals court decision today was a victory for consumers —preserving competition and choice in the health insurance market.”

“Mega-mergers kill jobs, raise prices, lessen choice, and lower health care quality,” Blumenthal said. “I am pleased that this misguided merger now appears off the table for good.”

The dissenter in the court case, Judge Brett Kavanaugh, said he agreed with Anthem that a merger would allow the larger company to negotiate lower provider rates that would result in cost savings for consumers. Kavanaugh said that rather than block the merger, he would have sent the case back to the lower court for further deliberations.

Cigna declined to comment on the court’s opinion, but filed a report to update the Securities and Exchange Commission on the judges’ decision, which said it would continue to press its claims against Anthem in the Delaware Court of Chancery, which has scheduled a preliminary hearing May 8.

Anthem has countersued. In that suit Anthem indicated it would try to seek a settlement with the Justice Department that would allow the merger to move forward.

David Balto, a former attorney with the Justice Department’s Antitrust Division who led a coalition of opponents to the merger, said the possibility of a settlement now is slim.

“I just don’t see that as being conceivable,” Balto said. “The Justice Department has won, and it was a pretty strong opinion.”

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Ana has written about politics and policy in Washington, D.C.. for Gannett, Thompson Reuters and UPI. She was a special correspondent for the Miami Herald, and a regular contributor to The New York TImes, Advertising Age and several other publications. She has also worked in broadcast journalism, for CNN and several local NPR stations. She is a graduate of the University of Maryland School of Journalism.

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