Washington – Anthem, Cigna and the U.S. Justice Department on Monday tried to sway a federal judge with widely differing views on the impact a proposed merger of the insurers would have on the U.S. health care market.
“The more concentrated the market, the more likely you will have higher prices, lower quality, reduced consumer choice and less innovation,” said Justice Department attorney Jon Jacobs at the opening of a trial that will stretch through the holiday period.
The Justice Department’s lawsuit to block Anthem’s acquisition of Cigna on antitrust grounds has been joined by eight states, including Connecticut, and the District of Columbia.
Connecticut Assistant Attorney General Rachel Davis had a front-row seat at the trial.
Anthem attorney Christopher Curran argued the combined companies would be able to lower doctors’ and hospitals’ fees, driving down health care costs and creating efficiencies that will benefit others.
U.S. District Judge Amy Berman Jackson is presiding over the trial, which has been split into two phases.
In this, the first phase, the Justice Department will try to show the proposed $54 billion merger will hurt big employer plans. In the second phase, scheduled to begin on Dec. 12, the government will try to prove the merger will dramatically decrease competition in dozens of local markets.
If the merger does not go through, Anthem will owe Cigna a $1.85 billion breakup fee.
Another antitrust lawsuit brought by the Justice Department to try to block a propose merger between Aetna and Humana will begin on Dec. 5.
On Monday, the issue was whether the negotiating power of a combined Anthem-Cigna would be good or bad for consumers, especially the big “national accounts,” a name for the insurance plans large companies provide their employees.
Jacobs argued the merger would leave only three major insurers providing group policies for big companies, the other two being Aetna and United Healthcare.
“Efficiencies don’t count if the only way to get them is more market power,” Jacobs said.
The Justice Department attorney also dismissed Anthem’s claims that the merger would result in better care. “Dropping the hammer on providers is inconsistent with collaborating with providers,” for better health care Jacobs said.
Anthem’s Curran said many of the Justice Department’s concerns about the commercial insurance market were misguided because most large companies self-insure, relying on insurers only for administrative services like adjusting and paying claims and providing a network of providers.
Curran also said Anthem was not a major player in the large group market because it sold commercial insurance in only 14 states and has to rely upon “rental” arrangements with other Blue Cross Blue Shield affiliates to provide coverage in other states.
The arrangement between Anthem and the other “blues” was discussed at length during the questioning of Anthem CEO Joseph Swedish, who sat on the witness chair for more than two hours.
Swedish said several independent Blue Cross Blue Shield companies strongly opposed the merger because it would result in stronger competition and Anthem would no longer have to “rent” from then in states where Cigna has a presence.
Anthem is a member of the Blue Cross Blue Shield Association, an organization of licensed independent insurers operating under agreed-upon rules in many states.
Swedish said he told representatives of other Blue Cross companies, “I want you to know we’re going to compete in all markets, but we will stay blue.”
Justice Department attorney Scott Fitzgerald dismissed the notion of stronger competition in some states. He said Anthem has a cozy relationship with other insurers in the Blue Cross Blue Shield Association and introduced as evidence documents that show Anthem has helped other Blue Cross companies win large business accounts in non-Anthem territory.
Swedish will return to the witness stand Tuesday.
Conflicts between Anthem and Cigna were also on trial, with Justice Department lawyers casting doubt the two insurers would be able to work together.
Curran agreed that “there has been a strained relationship in top management,” but said at other levels the two companies have been working together well on the merger.
The American Medical Association, one of the big medical groups that opposed the insurance mergers, commended the Justice Department for battling them.
“Allowing Anthem and Cigna to create a health insurance Goliath would compromise physicians’ ability to advocate for their patients – something we consider an integral part of our place in society,” said AMA President Andrew Gurman. “In practice, market power allows insurers to exert control over clinical decisions, which undermines our relationships with patients and eliminates crucial safeguards of patient care.”