By Brent Kendall
WASHINGTON -- The Justice Department and Anthem Inc. kicked off an antitrust trial Monday by presenting starkly different visions of the health insurer's proposed acquisition of rival Cigna Corp., vying to set the terms in a proceeding with high stakes for both companies.
The department, which is suing to block the Anthem-Cigna deal, told U.S. District Judge Amy Berman Jackson that the merger would deprive employers, consumers, hospitals and doctors of the benefits of competition between the two insurers.
National and regional employers will have only a few choices for health insurance if the deal goes through, Justice Department lawyer Jon Jacobs said. Anthem "decided it would be easier to buy Cigna rather than compete with them," he said.
Mr. Jacobs sought to exploit tensions between the two companies, which have quarreled behind the scenes and accused each other of breaching their 2015 merger agreement. He said the companies would have difficulty integrating their merger even if they got along, but "what we have here is an unusual amount of conflict between these two companies."
Anthem argued that all the building blocks of the government's antitrust challenge were wrong. Company lawyer Christopher Curran said the Cigna acquisition was a solution to "fundamental cost problems" with health care in the U.S., arguing that the increased scale would make it easier for Anthem to offer better rates.
Mr. Curran said many of the Justice Department's concerns about the commercial insurance market were misplaced because most large national employers self-insure, relying on insurance companies only for administrative services like paying claims.
He also said Anthem currently wasn't a national carrier because it sold commercial insurance in only 14 states and had to rely upon "rental" arrangements with other Blue Cross Blue Shield affiliates for its national reach.
Mr. Curran acknowledged the "strained relations at the level of top management" between the two insurers, but said those relationships wouldn't impede their integration.
Anthem CEO Joseph R. Swedish watched the developments from the counsel's table, just feet from the lectern. Cigna's lawyers remained silent throughout the day's proceedings.
Mr. Swedish took the witness stand late on Monday and began fielding a series of hostile questions from Justice Department lawyer Scott Fitzgerald, who attemptedto establish that Anthem had a cozy relationship with other affiliated insurers in the Blue Cross Blue Shield Association.
Mr. Fitzgerald introduced into evidence documents showing that Anthem has in the past helped Blue insurers in non-Anthem territories win national account business, and he asked skeptical questions about whether Anthem would actually use the Cigna brand to compete against those same insurers in the future.
Mr. Swedish said the government's description of Anthem's assistance to other Blue insurers was too simplistic. He also sought to tamp down concerns that Cigna will be limited by Blue association rules that will require the combined company to get two-thirds of its national plan revenue from Blue-branded business.
The Anthem executive and the Justice Department spent much of his early testimony tussling over terminology, such as whether insurers that push for discounts for health services are "dropping the hammer" on hospitals and doctors.
"That's not words I would use," Mr. Swedish said.
The chief executive will spend more time testifying Tuesday, including under friendlier questions from his own lawyer about Anthem's rationale for the transaction.
Judge Jackson didn't make many comments during the 90 minutes of opening statements, though she was more vocal during Anthem's portion of the presentation. She sought several points of clarification about the company's position -- for example, posing questions about how robustly a post-acquisition Cigna would be allowed to compete against Anthem's Blue Cross Blue Shield affiliates in states where Anthem isn't the Blue insurer.
After the opening statements, the Justice Department chose to kick off its case by calling to the witness stand a health-care consultant from Willis Towers Watson, a firm that consults with large employers.
The consultant, Randall Abbott, said large employers prefer to work with the handful of truly national health insurance networks as opposed to piecing together health coverage for their employees from a variety of regional networks.
Anthem is seeking to argue that the market has plenty of competition because large employers have many options at the regional level.
Write to Brent Kendall at firstname.lastname@example.org
(END) Dow Jones Newswires
November 22, 2016 02:48 ET (07:48 GMT)
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