(Bloomberg) — California’s insurance commissioner called on the U.S. government to block the effort by Indianapolis-based Anthem acquire Bloomfield, Connecticut-based Cigna Corp. for $48 billion, saying the deal would limit competition in the state’s health-insurance market.
While Commissioner Dave Jones doesn’t have legal authority to block the merger, his opposition, plus a 22-page letter he sent to the U.S. Justice Department, adds an influential voice from nation’s most populous state. The letter lays out why the deal should be stopped by the department, which is reviewing the takeover for antitrust issues.
“Across all of the market segments, there is substantial existing consolidation,” Jones said on a call with reporters Thursday. “The merger makes that situation worse.”
The takeover would give the combined Anthem-Cigna a greater than 50 percent market share in 28 counties in California, and a market share exceeding 40 percent in 38 counties, Jones said.
Cigna rose 1.7 percent to $128.69 at the close in New York, while Anthem gained 1.3 percent to $132.28.
Anthem said that it and Cigna have been working with regulators, including California’s Department of Managed Health Care, which has oversight in the state, to gain approval for the deal. Cigna referred questions to Anthem.
“We do not believe that the California Department of Insurance’s opinion is based on the true merits of this transaction,” Anthem said in a statement. “We are confident that the highly complementary nature and limited overlap of our organizations that will benefit the complex and competitive health insurance markets will be reviewed on the facts by the DOJ and appropriate state authorities.”
California’s Department of Managed Health Care said it’s reviewing the merger and plans to announce its decision when finished.
Peter Costa, an analyst at San Francisco-based Wells Fargo & Co., said the California regulator’s announcement reduces his confidence that the deal will be completed.
“We are a bit concerned that it was made public at this juncture and are lowering our view of the merger completing to below 50 percent,” he said in a note to clients.
In addition to Anthem’s deal for Cigna, Hartford, Connecticut-based Aetna has agreed to buy Louisville, Kentucky-based Humana. Challenges to the deals have been growing, with an influential doctors’ group and presumptive Democratic presidential nominee Hillary Clinton both calling for reviews.
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