The deep rift between merging health insurance companies Cigna Corp. and Anthem Inc. came further into public view Tuesday as transcripts of testimony from both companies’ chief executives were unsealed during a U.S. antitrust trial in Washington, D.C.
Cigna CEO David Cordani, who has publicly defended the tie-up, revealed his doubts about the benefits of the merger for his company under questioning by the Justice Department, which has filed a lawsuit to block the deal. And Anthem CEO Joseph Swedish disclosed his company had created a secret team to plan its integration while keeping Cigna executives in the dark because of their lack of cooperation.
Both executives testified in a closed courtroom Nov. 22. Their testimony was unsealed Monday and released Tuesday.
IBJ reported in June 2015 that the merger had run into delays as company leaders hashed out details over which executives would retain power.
Cordani told U.S. District Judge Amy Berman Jackson his company stopped work on the $48 billion tie-up when faced with the Justice Department’s July lawsuit. By that time his company was already confronting an Anthem integration and rebranding strategy called “Bias Blue,” which in his view would weaken Cigna by shifting members to the Blue Cross Blue Shield Association, a network of insurers that includes Anthem
Those concerns were outlined in a letter included in the transcript from Cigna’s general counsel Nicole Jones to Anthem’s, Tom Zielinski.
"Your approach to the regulatory strategy, when coupled with your approach to integration and other matters, appear to be designed to cause commercial harm to Cigna while simultaneously strengthening your fellow Blues," Jones wrote, according to the transcript.
The clash between the two executives undercuts one of Anthem’s key arguments in favor of the deal: that combining with Cigna will lead to more efficient operations, which will lower costs for customers. The government counters that the hostility between the two will prevent them from successfully integrating.
At stake is the $1.85 billion breakup fee Anthem must pay Cigna if the deal is blocked on antitrust grounds. Anthem won’t have to pay if it proves Cigna committed a “willful breach” of the agreement.
When asked about a newspaper advertisement placed by Anthem that said the merger would bring greater benefits and choice to consumers, Cordani said he disagreed because in his view the deal would narrow consumer choice by weakening Cigna offerings.
Cordani also rejected Anthem’s estimate that the merger could generate some $2 billion in savings for self-insured employer customers because the analysis was only focused on opportunities to generate discounts.
"We view that it is, at best, incomplete and, therefore, inaccurate," Cordani said.
In his testimony, Swedish conceded his company had created a team to plan the insurers’ integration that it kept secret from Cigna, prompting the judge to ask him, “How do you work on integration without talking to the person you’re integrating with?”
“Very good question,” Anthem’s CEO responded, explaining the move was prompted by Cigna’s decision to stop work on the combination.
“We wanted to proceed and they didn’t want it, and so we decided to continue, knowing that they would come back in when the time was right for them,” Swedish said, according to the transcript.
Spokesmen for both companies declined to comment on the unsealed testimony.
In further testimony Tuesday, Anthem fired back against U.S. claims that its Cigna takeover will undermine competition, with testimony from Morgan Kendrick, Anthem’s president of national accounts, who said the company plans to use Cigna to "aggressively compete" in new markets.
Kendrick also testified that in a bid to lower costs, large employers are turning to a range of options for insurance providers, from larger carriers like Anthem, to regional insurers and new entrants. That contrasts with the Justice Department’s claim that only a handful of large insurers can serve the country’s largest employers.
"These are all formidable players," Kendrick said.
Citing too much concentration in the health insurance market, the Justice Department has also sued to stop Aetna Inc. from combining with Humana Inc. That Washington federal court trial starts before a different judge on Dec. 5.