Anthem’s cost savings at center of merger suit appeal argument

CTMirror.org file photo

Anthem Blue Cross Blue Shield’s offices in Wallingford.

Washington – Anthem and the Justice Department faced off in court Friday over the insurer’s proposed merger with Cigna, with the legal wrangling centered on whether any savings from the deal would justify shrinking the market for large employer insurance policies from four to three carriers.

A federal district court in February sided with the Justice Department – and 11 states including Connecticut – in blocking the $54 billion merger.

The court determined any “efficiencies” that the merged company could achieve, if there were any at all, would not offset the harm to competition. In addition, the court ruled, any reductions in medical costs would come from the merged company’s increased market power and its ability to reduce payments to doctors and hospitals, harming health care quality.

Before a three-judge panel of the U.S. Circuit Court for the District of Columbia Friday, Anthem attorney Christopher Curran agreed the merged company would seek to cut fees to providers, but he argued the estimated $2.4 billion in “efficiencies” that resulted would benefit customers because the savings would be passed along as lower premiums.

“Consumers should rejoice,” Curran said.

But Judge Brett Kavanaugh noted Consumers Union had filed an amicus brief saying the merger would harm consumers by offering fewer choices and poorer care.

Kavanaugh also noted “dogs aren’t barking,” meaning that no large companies — Anthem’s main customers — have filed with the court in support of the merger.

“Maybe there are dogs that aren’t barking because there is uncertainty about the merger,” Kavanaugh said.

The judges also raised questions about another argument the Justice Department rmade in objecting to the merger – that Cigna’s value-based method of compensating doctors and hospitals would be harmed. The result is a unique “wellness program” that results in better tracking of patients and preventive measures aimed at keeping people from getting sicker and being hospitalized.

“If you have these relationships with providers, you have to pay them more,” said Justice Department attorney Scott Westrich.

In an amicus brief filed Thursday, the American Hospital Association said Anthem is less willing to innovate to develop value-based reimbursement systems than Cigna.

Should the merger go through, Cigna — the more innovative of the two companies – would disappear as an independent competitor, the AHA said.

Anthem said a main reason to merge with Cigna was to acquire its wellness programs, and those would not disappear.

“Anthem has tried and failed miserably to match them,” Curran said.

Judges also questioned how Cigna’s brand would fare under the merger because, under Blue Cross/Blue Shield rules, at least 80 percent of the policies Anthem, a Blue Cross/Blue Shield company, sells in any state would have to have the “Blue brand.”

Time is running out for Anthem to get approval of a merger because its agreement with Cigna expires on April 30.

Cigna wants out of the deal, and is suing Anthem in a Delaware chancery court for a $1.85 billion breakup fee and more than $13 billion in damages

Opponents of the merger are concerned Anthem may be lobbying the White House to press the Justice Department to settle the antitrust suit.

An Anthem attorney at a hearing in the Delaware Chancery Court last month said the company was considering  pursuing a resolution with the DOJ. The attorney also noted that Vice President Mike Pence has been supportive of the merger. Anthem is headquartered in Pence’s home state of Indiana.

Unlike other insurers, who say they are concerned about the legislation’s cuts to Medicaid and its reductions in subsidies to help people buy insurance, Anthem has also come out in favor of the GOP’s health care plan, with CEO Joseph Swedish saying the bill would address problems the Affordale Care Act has created for insurers.

On Friday, a watchdog group led by former Obama administration lawyers called for an investigation into whether the White House is interfering in the merger cae.

“We are concerned that Administration officials may have engaged in inappropriate conduct regarding the Anthem-Cigna litigation,” Ian Bassin, the executive director of United to Protect Democracy, wrote in the letter to Michael Horowitz, the inspector general for the Justice Department.