Attorneys for the U.S. Department of Justice and Anthem laid out their arguments Monday in opening statements of a court battle over what would be the largest ever health insurer mergers in the country. The sides clashed over how to define the commercial insurance market and what the merger could mean for the future of value-based payment models.
Anthem and Cigna are proposing a $54.2 billion deal that would scramble the health insurance industry by combining two of the “big five” national insurers. Two others—Aetna and Humana—are defending their own merger that is being challenged by the DOJ. That case will be heard next month.
The government is arguing that both mergers would result in higher prices, reduced quality, fewer consumer choices and less innovation in healthcare.
U.S. District Judge Amy Berman Jackson Monday heard Anthem counter that a merger would allow it to pursue innovative reimbursement methods and that the unique circumstances of the national insurance market and regional markets belied the government's stance that the merger would drastically reduce competition.
The much-anticipated showdown drew a large crowd that required two extra rooms in the District of Columbia courthouse to accommodate the overflow. The case is being closely watched by hospitals and doctors as well as other insurers. Hospitals have been mostly uneasy at the thought of the merger, saying they must be able to negotiate favorable rates to continue to shoulder the high costs of charity and emergency care.
Dr. Andrew Gurman, president of the American Medical Association, the nation's largest organization of physicians, said in a news release Monday that the Aetna-Cigna merger would compromise physicians' ability to advocate for their patients.
“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,” Gurman said.
Jackson has said she expects to rule on the case by the end of January. That will be just as the Donald Trump administration begins its transition into the White House, which Anthem attorney Christopher Curran admitted “adds uncertainty to the future of commercial health insurance in this country.”
Jackson will hear arguments this week about the merger's national implications. Unless she spikes the deal after that first phase, the second phase of the trial will focus on regional markets.
After asking several questions of Anthem's lawyer, Jackson indicated the case could turn on the lawfulness of large market power if it is used to drive down prices.
Justice Department lawyer Jon Jacobs said the government's witnesses will include insurance brokers and providers from markets in California, Connecticut, Indiana, New Hampshire and Virginia to talk about the state of competition and how the merger would affect care quality and innovation.
Jacobs said Anthem's claims of market efficiencies should be viewed skeptically because they are including simple rebranding of Cigna plans and the sheer market power that would be gained. CEOs of both Anthem and Cigna have also said they are concerned that “dropping the hammer” on providers to get lower rates would strain relations.
“Collaborating with providers means working together with them, not pushing and prodding them,” Jacobs said.
The openings also touched on a squabble among top brass as Anthem and Cigna were negotiating the merger. Curran refuted that claim, saying that there is no clash of cultures and any disagreement about corporate governing would not impede the tie-up.
The opening statements also drew different views of how companies can further innovation. The government argued that a decline in competition would lead to less incentive for companies to create new payment models based on value and quality of care. Cigna developed many such methods in response to low prices from Anthem, Jacobs argued.
Curran, however, said Anthem would be able to scale up those models and therefore put more providers and patients in value-based payment methods.
Curran said employees at large companies have multiple options in different states even if there are few insurance companies at the top. “There's a whole panoply of options and employers can and do mix and match,” he said.
But the vast majority of large companies are self-insured and use an insurance company only for administrative services such as claims arbitration and network access. Savings from the insurance companies would thus be passed along to those employers, Curran said.
Anthem, as the largest member of the Blue Cross and Blue Shield Association, competes in 14 states as a Blues licensee. Jacobs said this furthers the problem of not enough competition in the commercial insurance market.
Jacobs said the Blues plans should be viewed as a single competitor because they are in exclusive territories and Anthem benefits from new Blues plans in states where Anthem competes. With this view, the merger would create a market that is too concentrated.