By: Ana Radelat and CT Mirror
In a vicious legal battle laid out in court papers unsealed Friday, Cigna accuses Anthem of undermining its business by stealing confidential information and soliciting its customers.
Anthem counters in a rival filing that Cigna worked to sabotage the companies’ proposed merger after its executives were not promised the positions they wanted in the merged company.
In their blistering lawsuits, the companies blame each other for the failure to obtain regulatory approval for the merger.
In its 51-page suit filed in the Delaware Court of Chancery earlier this week, Cigna charged that Anthem “put its own interests ahead of its contractual obligations” and acted “with the intent to harm Cigna’s business.”
The Cigna lawsuit asks for an immediate end to the merger agreement, a $1.85 billion reverse breakup fee and at least $13 billion in damages.
Hostilities between the two insurers intensify days after a judge ruled the deal violated antitrust law
The Wall Street Journal
Anthem Inc. responded to a suit by Cigna Corp. with its own suit against its merger partner, escalating the hostilities between the two health insurers in the wake of a judge’s decision that their $48 billion deal violated antitrust law.
In its suit, filed like Cigna’s in the Delaware Court of Chancery, Anthem said it sought a temporary restraining order to block Cigna from ending their pact. It also sought to force Cigna to adhere to the terms of their deal and requested damages. Anthem said it was reacting to “Cigna’s campaign to sabotage the merger and to try to deflect attention from its repeated willful breaches of the merger agreement.”
Anthem’s move is a fast response to Cigna’s announcement Tuesday that it was terminating their agreement and pursuing litigation seeking a $1.85 billion breakup fee plus more than $13 billion in damages from its deal partner. Cigna had said that Anthem violated the terms of their agreement, and that its strategy had led to the rejection of the deal.
1. What did the District Court decide?
On February 8, 2017, the U.S. District Court for the District of Columbia issued an order enjoining the proposed merger between Cigna Corporation and Anthem, Inc. Judge Jackson’s decision to block the merger was based on numerous factual determinations, including:
- National Accounts: Judge Jackson found that the merger would result in a level of market concentration that would be presumptively unlawful in the market for national accounts in the 14 states where Anthem is the Blue Cross Blue Shield licensee. She also concluded that the merger would result in higher prices for the ASO insurance that Anthem and Cigna sell and that it would have other anticompetitive effects, including eliminating the two firms’ vigorous competition against each other for national accounts and diminishing the prospects for innovation in the market.
- Blue Cross Blue Shield Association: Judge Jackson found that the entities organized under the Blue Cross Blue Shield Association, including Anthem “work together to win national business” and that Anthem’s intention to “rebrand” Cigna customers as Blue customers – to ensure that Anthem did not violate restrictive rules imposed by the Blues association – could adversely impact competition. The Court additionally found that the rules of the Blue Cross Blue Shield Association give rise to “an inherent conflict of interest” vis-a-vis the transaction.
- Efficiencies: The district court rejected Anthem’s principal defense: that the anticompetitive effects of the transaction would be outweighed by efficiencies that would benefit consumers. Judge Jackson noted in her opinion that Anthem had “not pointed the Court to a single litigated case in which the merging parties were successful in overcoming the government’s case by presenting evidence of efficiencies.”
The full document can be found on the Securities and Exchange Commission website, here.
Judge David Proctor of the Northern District of Alabama issued an Order in MDL 2406 in re Blue Cross Blue Shield Antitrust Litigation denying certain defendants motion to certify the Court’s Order denying their motions to dismiss on personal jurisdiction and venue grounds.
To Read the Order: Memo Opinion
The New York Times
The ruling, by Judge Amy Berman Jackson of the Federal District Court for the District of Columbia, came two weeks after another federal judge blocked a proposed $37 billion merger between Aetna and Humana on antitrust grounds.
Judge Jackson wrote in her order that she found the Justice Department’s arguments against the deal persuasive, and that putting Anthem and Cigna together would harm customers.
“The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects,” the judge wrote. “It will eliminate the two firms’ vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market.”
Under the merger agreement’s terms, Anthem is obligated to pay Cigna a $1.85 billion breakup fee.
A representative for Cigna declined to comment. A spokeswoman for Anthem also declined to comment.
The merger process between Anthem and Cigna has been notoriously contentious. In September, the Justice Department revealed court documents that showed the two had accused each other of breaching their agreement.
The government argued that the disputes ran counter to a major defense offered by the companies — that the deal could enhance competition by creating billions of dollars in savings. The government argued that such savings required the companies to cooperate in integrating their businesses.
Medical enrollment increased by about 1.3 million members in 2016, or 3.4 percent, totaling about 39.9 million members.
By: Susan Morse
Anthem’s fourth quarter profits exceeded expectations, the insurer announced Wednesday, reporting $368.4 million, compared to $180.9 million in the last three months of 2015.
“Our fourth quarter 2016 core earnings and financial metrics tracked well versus our expectations, reflecting the efforts of all of our associates to improve affordability on behalf of our members,” said President and CEO Joseph Swedish.
Anthem also ended 2016 with better than expected enrollment, said John Gallina, executive vice president and CFO.
Medical enrollment increased by about 1.3 million members in 2016, or 3.4 percent, totaling about 39.9 million members as of the end of 2016.
For the year, Anthem reported profits of $2.46 billion, as compared to $2.56 billion in 2015.
Law360, New York (October 12, 2016, 4:24 PM EDT) — Three months after the Sixth Circuit vacated a $30 million federal class action settlement resolving antitrust claims against Blue Cross Blue Shield of Michigan, the parties on Tuesday unveiled a new settlement agreement for the same amount of money.
Under the amended deal, BCBS Michigan denies all claims and says it decided to settle the six-year-old case to avoid further expenses and the burden of litigation. The plaintiffs — direct purchasers of allegedly overpriced health care services — said that a settlement is in the best interest of the class.
The Sixth Circuit remanded the case in early July, vacating the Michigan federal court’s approval of the settlement after 26 self-insured companies whose health care claims had been administered by BCBS Michigan objected to the process under which the previous settlement was reached.
They’d claimed that hundreds of documents had been kept sealed and out of public view and that the settlement itself provided only meager relief to about 8 million potential class members. In its July ruling, the Sixth Circuit also vacated the district court’s orders sealing the documents in question.
In August, U.S. District Judge Denise Page Hood denied the 26 companies’ request to intervene in the suit as it proceeded on remand, finding that the Sixth Circuit’s opinion hadn’t addressed their right to intervene, only the unsealing of court records.
The Sixth Circuit didn’t indicate that the parties had to renegotiate the settlement or conduct further discovery to present a new settlement proposal. Instead, the panel told the district court to start the approval process anew, the judge said.
The case dates back to 2010 and was one of several actions challenging the insurer’s use of “most favored nation” clauses, which require hospitals to charge BCBS’ rival insurers at least as much as they charged BCBS Michigan. In exchange for the clauses, the insurer agreed to pay the hospitals higher rates, the suit said.
Aetna claimed this summer that it was pulling out of all but four of the 15 states where it was providing Obamacare individual insurance because of a business decision — it was simply losing too much money on the Obamacare exchanges.
Now a federal judge has ruled that that was a rank falsehood. In fact, says Judge John D. Bates, Aetna made its decision at least partially in response to a federal antitrust lawsuit blocking its proposed $37-billion merger with Humana. Aetna threatened federal officials with the pullout before the lawsuit was filed, and followed through on its threat once it was filed. Bates made the observations in the course of a ruling he issued Monday blocking the merger.
Aetna executives had moved heaven and earth to conceal their decision-making process from the court, in part by discussing the matter on the phone rather than in emails, and by shielding what did get put in writing with the cloak of attorney-client privilege, a practice Bates found came close to “malfeasance.”
The judge’s conclusions about Aetna’s real reasons for pulling out of Obamacare — as opposed to the rationalization the company made in public — are crucial for the debate over the fate of the Affordable Care Act. That’s because the company’s withdrawal has been exploited by Republicans to justify repealing the act. Just last week, House Speaker Paul Ryan (R-Wis.) cited Aetna’s action on the “Charlie Rose” show, saying that it proved how shaky the exchanges were.
Bates found that this rationalization was largely untrue. In fact, he noted, Aetna pulled out of some states and counties that were actually profitable to make a point in its lawsuit defense — and then misled the public about its motivations. Bates’ analysis relies in part on a “smoking gun” letter to the Justice Department in which Chief Executive Mark Bertolini explicitly ties Aetna’s participation in Obamacare to the DOJ’s actions on the merger, which we reported in August. But it goes much further.
The proposed $34-billion merger of Aetna Inc. and Humana Inc. to form one of the nation’s largest health insurers was blocked Monday by a federal judge on antitrust grounds.
The ruling by U.S. District Judge John Bates in the District of Columbia was a victory for the Justice Department, which under the Obama administration sued to stop the deal.
In his decision, Bates agreed with the agency’s assertion that the deal would threaten competition, especially in the market for seniors who buy privately operated Medicare health plans called Medicare Advantage.
“Federal regulation would likely be insufficient to prevent the merged firm from raising prices or reducing benefits,” and there is “valuable head-to-head competition between Aetna and Humana which the merger would eliminate,” Bates wrote.
His decision raises questions about whether another huge health-insurance merger, Anthem Inc.’s proposed $48-billion purchase of Cigna Corp., might be in peril as well. The Justice Department also sued to block that deal for antitrust reasons; the case is being heard by a different judge.