Very different views of the impact their proposed $48 billion combination will have on health-insurance markets were presented by Anthem Inc., Cigna Corp. and the U.S. government to a federal judge.
Since the deal will increase the companies’ dominance and cut consumer choice, the biggest merger in the history of the American health-insurance industry should be blocked, said a Justice Department lawyer at the start of an antitrust trial in Washington.
The combined company would pass the savings on to employers as the combination will be able to lower rates paid to health-care providers, an attorney for Anthem responded.
The government’s assertion was disputed by Anthem Chief Executive Officer Joseph Swedish who claimed that his company would simply “drop the hammer” on providers by imposing lower rates when he later took a stand on the issue.
The two-part trial is scheduled to span more than a month and which side has the most persuasive evidence during is to be decided by U.S. District Judge Amy Berman Jackson. The combined company will hurt large national employers is what the U.S. government will attempt to prove in the first phase. The proposed tie-up’s effect on local markets will by the focus of the second part, set to start Dec. 12.
Government attorney Jon Jacobs said that the judge should reject the companies’ argument that by combining they will be able to lower rates and added that the merger is the most complex in the industry’s history and will harm consumers in at least 60 markets.
He said that those savings don’t count “if the only way you get them is through more market power.” “The more concentrated the market, the more likely you’ll have higher prices, lower quality, reduced consumer choice and less innovation.”
His company wouldn’t use market power to wrest discounted reimbursement rates from health-care providers in all cases, Swedish, 65, who was called as a witness by the Justice Department, told the court.
Companies with conflicting strategies: Cigna’s collaboration with doctors on the one hand, “and ‘drop the hammer’ on the other”, would be combined together by the merger the government, in the complaint, alleged an Anthem executive had told Swedish.
Prompting the CEO to disavow the terminology as “very old school,” Justice Department lawyer Scott Fitzgerald pressed Swedish on that point.
“We don’t live in a discount world anymore,” Swedish said. Reduced cost was a pillar of his company’s trial defense, said the judge prompted by this comment.
In the waning days of the Obama administration, which is trying to prevent the industry from shrinking, the Anthem-Cigna lawsuit is one of two federal health-care antitrust cases going to trial. The second case, against the $38 billion tie-up of Aetna Inc. and Humana Inc., opens before another judge in Washington on Dec. 5.
An opportunity to further shape the future of health care after passage of the Affordable Care Act was seized by President Barack Obama’s administration by challenging the deals earlier this year.
President-elect Donald Trump has said that he would block AT&T Inc.’s plan to buy Time Warner Inc. even though he has said his administration will be more pro-business than his predecessor’s.
(Adapted from Bloomberg)