AnthemCigna antitrust trial begins
Feds, firms disagree on merger’s direction
Government antitrust lawyers went to federal court Monday for the start of a trial in their quest to block Anthem’s proposed acquisition of Cigna, a merger that could create the nation’s largest health insurance company and potentially reshape the U.S. market for employer-provided coverage.
Indianapolis-based Anthem, which wants to consolidate the private health insurance market to gain scale, said the deal would give the combined companies better leverage for extracting improved pricing from doctors and hospitals that could be passed on to customers. Anthem would have to pay a $1.85 billion breakup fee to Bloomfield, Conn.-based Cigna if the deal is not approved.
In July 2015, Anthem agreed to pay $54 billion to buy Cigna to create a gigantic for-profit insurer with annual revenues of more than $115 billion and more than 53 million insured patients. The deal is now valued at $48 billion.
The two insurers cover about 17% of the U.S. population. As a result, the Justice Department and several state attorneys general sued to block the deal on antitrust grounds, leading to Monday’s opening of a bench trial before Judge Amy Berman Jackson at the U.S. District Court for the District of Columbia.
Federal regulators argue that consolidation of the market for private health insurance for employers and individuals “would substantially lessen competition, harming millions of American consumers, as well as doctors and hospitals,” according to the Justice Department’s filing.
The health insurance industry is dominated by five companies. Four of them have proposed mergers, raising uncertainty about the sector’s future amid President-elect Donald Trump’s vows to remake much of the current health care insurance laws, starting with repealing or amending the Affordable Care Act.
The trial also serves as a preview for an antitrust proceeding over the proposed merger of Aetna and Humana. That trial is set to begin next month.
“This antitrust trial will be significant first and foremost simply because it is going to trial,” said Anthony Sabino, a business professor at St. John’s University. “So, whatever the outcome just the fact this is going to court is significant. “
In pretrial briefs, Anthem and Cigna stuck to their argument that the merger would lower costs for consumers.
“The U.S. Department of Justice’s Antitrust Division and a handful of State AGs seek to enjoin a merger they acknowledge is likely to reduce health care costs for millions of working Americans,” the companies said.
Government lawyers said in their pretrial brief that Anthem has “earned a reputation in many markets for having poor customer service, being slow to innovate and being difficult to work with for doctors and hospitals.”
Cigna “increasingly competes head to head with Anthem by finding innovative ways to lower its customers’ medical costs,” the DOJ pretrial brief said, adding that those efforts have benefitted U.S. consumers by “pressuring Anthem to respond.”