The $54 billion proposed merger between Anthem and Cigna has hit a huge roadblock
The deal, which would create the largest health insurance company in the US based on persons covered, faces pushback from Connecticut State Attorney General George Jepsen on Thursday, according to a report from the Hartford Courant.
Cigna is based in Connecticut, so the deal must be vetted by state authorities.
Jepsen’s major issue was the possibility of decreased competition due to the merger, leading to higher prices.
“Further concentration could lead to an unacceptable accumulation of market power, which arguably could lead to higher prices and negative effects on quality of care through reduced products, service and innovation,” he told the Courant.
One of the largest factors influencing health insurance costs is competition, the fewer insurers offering coverage in a given area, the higher the costs typically are.
Jepsen’s office has been conducting a review of the deal for the past year and is expected to make a final decision whether to challenge the merger in court in about two weeks, said the Courant.
Following the news, Cigna stock dropped slightly while Anthem fell about 2%.
This is another political setback for the merger. US Senate Democrats on the Senate Judiciary Committee asked the Justice department to block the merger in late June.
Additionally, the statement sent shockwaves to another proposed deal between Humana and Aetna. Aetna proposed a $37 billion takeover of Humana in July 2015. Humana stock dropped just shy of 7% while Aetna stock was down roughly 1.6% as of 1 p.m. ET.
Here’s Anthem’s stock: