The first half of the federal trial challenging the planned merger between insurance giants Anthem and Cigna ended Friday, and a federal judge could rule in the next two weeks.
The Department of Justice sued to block the merger between the two companies, arguing consolidating two of the country’s so-called “Big Five” insurers would tamp down on competition and result in fewer options and higher costs for consumers.
In proceedings playing out in a Washington, D.C. district court, Cigna and Indianapolis-based Anthem argue consolidating operations would cut down on costs as well as create a company with enormous bargaining power, which could be directed toward negotiating lower prices for insurance customers.
The trial’s first half focused on whether the merger would hinder competition in the national market, which comprises large-scale employers with workers spread across multiple states.
Saint Louis University antitrust law specialist Tim Greaney says the DOJ is submitting ample evidence the two companies are indeed competing for those large, national insurance contracts. He says the smaller Cigna is seen as a scrappy player that keeps the larger Anthem on its toes.
“When you lose that kind of competitor through the merger, the harm is even greater than the numbers,” says Greaney. “Because you lost the maverick, the one that shakes up the market and that heretofore has been the price-cutter.”
Greaney says the companies say in fact it’s the employers holding the cards. These are huge companies, he says, and they have a lot of negotiating power.
“These are big buyers,” says Greaney. “We’re talking about national employers, and as they said, they won’t stand by meekly and pay higher prices.”
Anthem has argued those large accounts often insure themselves and only rely on insurance companies for administrative duties. Additionally, the company says there’s no rule saying large national accounts can’t piece together plans from multiple local insurers.
If the federal judge finds the DOJ’s argument convincing, she could scrap the second half of the trial, which is scheduled to begin in two weeks and examine the merger’s effect on smaller, local markets.
