Anthem Fights U.S. Suit Saying Cigna Will Help It CompeteBy
Cigna will compete against Blue Cross plans, executive says
Anthem presents evidence as U.S. rests in antitrust trial
Anthem Inc. fired back against U.S. claims that the health insurer’s planned $48 billion takeover of rival Cigna Corp. will undermine competition, with an Anthem executive testifying that the company plans to use Cigna to compete in new markets.
Acquiring Cigna will give Anthem a way to vie for business against Blue Cross & Blue Shield Association plans around the country, said Morgan Kendrick, Anthem’s president of national accounts. As a member of the association, Anthem is restricted in competing against other Blue Cross Blue Shield plans, but Kendrick testified Tuesday that Cigna won’t be.
"Our intent is to aggressively compete" using Cigna as a tool, he said.
Kendrick testified after the U.S. Justice Department wrapped up its case in the first phase of the government’s lawsuit seeking to block the merger. The U.S. says the deal will eliminate choice in markets around the country and harm consumers and doctors.
Part of the government’s case focuses on competition among the biggest U.S. insurers that can sell services to large employers with workers in multiple states. Even though it’s located in just 14 states, Anthem can offer nationwide coverage by partnering with Blue Cross Blue Shield plans around the country.
The Justice Department disputes that Cigna will compete hard against those plans if the merger goes through. That’s because Anthem earns fees if another Blue plan wins an account and because of association rules that would limit Cigna’s growth, the government says.
Range of Providers
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.
That view was supported by Anthem’s economics expert, Lona Fowdur, who criticized the Justice Department’s economic analysis of the merger’s competitive effects. Fowdur testified that employers have alternatives beyond the four major carriers -- Anthem, Cigna, UnitedHealth Group Inc. and Aetna Inc. Regional insurers are "quite significant," she said, and employers can split up their business among different carriers. They can also simply threaten to switch to other rivals to ensure competitive pricing, she said.
U.S. District Judge Amy Berman Jackson sounded skeptical at times during Fowdur’s testimony, asking if there is really a significant amount of business going to the smaller companies competing against the largest insurers.
"When does it start to become a problem?" the judge asked about concentration among the biggest insurers.
"From everything that we’re seeing here, there’s enough choice, there’s enough dynamism in this marketplace," Fowdur said. "That choice is, in fact, expanding rather than shrinking."
The case is U.S. v. Anthem, 16-cv-1493, U.S. District Court, District of Columbia (Washington).