US District Judge Amy Berman Jackson in Washington ruled late on Wednesday that the effect of the tie-up between Anthem and Cigna “may be substantially to lessen competition” in “what is already a highly concentrated market”, particularly in the sale of commercial health insurance to “national accounts” — customers with more than 5,000 employees, typically spread over two or more states.

The decision, which will result in Anthem paying a $1.85bn break fee to Cigna, is set to further unravel the wave of consolidation that swept the health insurance sector in 2015 in the aftermath of then-President Barack Obama’s signature healthcare policy.

Several large insurers believed there was a tacit agreement with the Obama administration that if they agreed to participate in the former government’s plan, which included providing health insurance to 20m people who had no coverage, they would have been allowed to merge with rivals to face higher costs.

However, the Department of Justice filed two lawsuits last summer to block the Cigna-Anthem deal as well as Aetna’s $37bn takeover of Humana as it warned that both transactions would harm consumers’ interests by reducing competition.

Aetna’s tie-up with Humana was also blocked last month by US District Judge John Bates, who ruled that the deal was anti-competitive.

On Wednesday, Judge Jackson noted that the claimed medical cost savings, championed in particular by Anthem, were not “merger-specific, they are not verifiable, and it is questionable whether they are ‘efficiencies’ at all”.

The merger first announced in 2015 between Anthem and Cigna — the second and third-largest medical insurers in the US — has been on shaky ground for months. A filing from the DoJ in September revealed the two companies had been trading accusations of breaching deal terms.

All large insurers involved in the wave of dealmaking have since complained that due to so-called Obamacare they were incurring losses. They said this was because a large number of people who signed up to the new public marketplaces providing insurance were either much sicker or older than expected.

Many insurers threatened to pull out completely from the Obamacare exchanges unless their deals were approved by the court.

However, since Donald Trump was elected US president in November, the future of America’s healthcare has been in a state of uncertainty.

The former New York property tycoon and reality TV showman signed an executive order within hours of becoming president that significantly reduced the enforcement of the Obama administration’s health act. It called on government agencies to waive or delay parts of the Affordable Care Act that would impose a “cost, penalty or burden” on individuals or insurers, as well as other businesses and states.

Mr Trump said he plans to withdraw completely Obamacare but has not clarified what would replace it, leaving about 20m Americans in a state of limbo.

The controversial decision, however, has raised the hopes of the health insurers who have seen their deals challenged, as some analysts expect that the new administration will be more open to consolidation.

(Published by Financial Times - February 9, 2017)