Anthem Inc.’s proposed merger with Cigna Corp. would reduce health-care competition and raise costs for consumers, U.S. antitrust lawyers will argue Monday when the government goes to court to try to block the transaction.
Their $48 billion merger—the biggest in the history of the American health-insurance industry—would likely give the enlarged company the power to raise prices for insurance, cut payments to doctors and reduce the quality of service, the Justice Department has said in court papers.
Anthem counters that by buying Cigna it would be able to lower reimbursement rates to health-care providers. Those savings would be passed on to employers and policyholders, the Indianapolis-based company says.
The Justice Department’s lawsuit opposing the Anthem-Cigna merger is one of two health-care antitrust cases going to trial in the waning days of the Obama administration as it tries to prevent that industry from shrinking to three national carriers from five. The second case, against the $38 billion tie-up of Aetna Inc. and Humana Inc., opens before another judge in Washington, D.C., on Dec. 5.
By challenging the deals earlier this year, President Barack Obama’s administration seized an opportunity to further shape the future of health care after passage of the Affordable Care Act.
President-elect Donald Trump has said his administration will be more pro-business than his predecessor’s, but he has also said he would block AT&T Inc.’s $85 billion plan to buy Time Warner Inc. Trump, who is to take office on Jan. 20, said Friday that he would nominate U.S. Sen. Jeff Sessions to be attorney general. The Alabama Republican doesn’t have a clear track record on antitrust issues, leaving his approach to competition preservation unclear.
The government said in its complaint that Anthem’s deal for Cigna would hurt competition for millions of consumers who receive commercial insurance from national employers as well as large-group employers in at least 35 metropolitan areas, including New York.
The run-up to the Anthem-Cigna trial was marked by acrimony between the companies, with each accusing the other of breaching terms of their deal. Cigna stands to collect a $1.85 billion break up fee if the merger is blocked. Last month, the U.S. won an order compelling the companies to turn over written correspondence between the two, which the government argued was relevant to combating the carriers’ claims that their combination would create a more efficient company. The U.S. could use those letters as evidence during the trial.
“Governance disputes between defendants have escalated, and the firms are now accusing each other of breaching the merger agreement,” the U.S. said in court papers. “Because the breach letters reveal the current state of hostility between defendants, the letters evince barriers to integrating these firms and are relevant” to the defenses raised by the companies.
The trial is scheduled to last more than a month, in two phases. In the first, the U.S. will attempt to prove that the combined company would hurt large national employers. The second phase, set to start Dec. 12, will focus on the proposed tie-up’s effect on local markets.
Backing the Justice Department are 11 states, including New York, California and Connecticut, plus the District of Columbia. The American Medical Association on Monday also reiterated its opposition to the deal.
“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," AMA President Andrew Gurman said in a written remarks. "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."
Anthem had pushed the judge for a trial scheduled to finish by the end of the year so it has time to get state regulatory approvals by the merger deadline of April 30.